1999 (9) TMI 79

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....nal was correct in law in holding that the provisions made towards purchase tax amounting to Rs. 3,86,000 was not allowable expenditure ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that a sum of Rs. 3,86,000 provided by the assessee in the profit and loss account towards the liability for purchase tax for that year was not allowable expenditure, since it was not a statutory liability, overlooking the Supreme Court decision in the case of Kedernath Jute Mfg. Co. Ltd. [1971] 82 ITR 363 ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the purchase tax provision was not a ....

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....Mills Co. Ltd. [1982] 49 STC 249, and the Supreme Court in Sterling, Foods v. State of Karnataka [1986] 63 STC 239, this court took the view that it could not be said that the assessee had acted fancifully or unreasonably in making the provision. Therefore, the assessee was entitled to deduction of the provision made for purchase tax liability in the assessment year 1982-83. This decision was followed in Baby Marine Exports v. CIT [1997] 225 ITR 631 (Ker). We are in respectful agreement with the above view taken in the two decisions. Learned standing counsel for the Revenue pointed out that as there is no specific finding by the authorities under the Income-tax Act that the assessee is following the mercantile system, the assessee cannot....