TaxTMI 
TaxTMI 
1980 (4) TMI 93
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....e business income of the assessee-company ? " The assessee is a private limited company and the reference relates to the assessment year 1971-72. For this assessment year, the assessee-company claimed a deduction of Rs. 1,84,734 on account of sales tax liability on sales of "Kuil" and "Star" brand matches. The ITO, however, was of the view that since under the West Bengal Sales Tax Act, sales tax was not payable on sale proceeds of matches made or processed otherwise than in a factory as defined in the Factories Act, 1948, and matches in which match sticks were made from bamboo splints came under that category, sales tax was not attracted on sales of those two brands of matches and the assessee had also not been asked to pay sales tax on....
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....971] 82 ITR 363 (SC) and in the case of Royal Boot House reported in [1970] 75 ITR 507 (Cal). In the light of the circumstances, it was observed by the Tribunal that it could not be categorically stated that the fictitious provision for sales tax had been made by the assessee. The question of allowing as a deduction liability in the accounts in the year to which this appeal pertains it would not be relevant to determine the correctness of such liability. The fact that it is in dispute will not conclude the controversy about the correctness of this liability. What is more relevant is the fact that it has been provided for. Such provision in the opinion of the Tribunal cannot be stated to have been made by the assessee to avoid the inciden....
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....o brands referred to above were not assessable to tax but subsequently by a notification the sales tax authorities wanted to levy sales tax on such sale proceeds. Accordingly, the assessment was reopened. The assessee in this case disputed the liability to pay such tax. So, not only the liability but also the quantification of taxation were challenged. The liability, as held by their Lordships of the Supreme Court, would not be enforced till quantification was effected by the assessment proceedings. The liability for payment of tax was independent of the assessment. In this view of the matter, the assessee who was following the mercantile system of accounting in the case before their Lordships of the Supreme Court was entitled to deduct fro....
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....e the amount was sub judice and as the assessee had drawn the amount only after furnishing Security, the assessee had no absolute right to receive the extra amount of compensation till the decision of the appeal by the High Court and, therefore, it could not have accrued during the relevant year. On a reference, it was held that the compensation amount could be considered to have accrued or arisen only when the said amount had become determinate and payable. The enhanced amount might be affirmed or reduced by the High Court or the entire amount might be disallowed. Thus, the right of the assessee to receive any further amount was clearly unsettled. Thus, with regard to the enhanced amount which was subsequently fixed by the order of t....
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....year, but in the accounting year. The agreement between the parties was wholly silent on interest. It was also held that if the liability was contingent and did not raise any definite obligation in the accounting year, it could not be the subject-matter of deduction even under the mercantile system of accounting. This decision has also little bearing in the case on hand. In this case, it cannot be said that the liability was contingent. Liability to pay sales tax was disputed by the assessee. As the sales tax authority levied tax only on sale proceeds and reopened assessment, the assessee claimed deduction. The claim for deduction cannot be said to be fictitious. So the assessee could be entitled to claim deduction in respect of sales tax w....