TaxTMI 
TaxTMI 
1984 (7) TMI 100
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....hese sales had not been settled. An agreement was entered into between the assessee-firm and Chunilal Pranjivandas & Co., in September 1968. The business transaction between the two concerns had been arranged in such a way that the second party was paying to the assessee not the full sale price but some thighs less to provide for sale tax. The Mysore High Court had held that Chunilal Pranjivandas & Co. would not be liable to sales tax. Hence Chunilal Pranjivandas & Co. had, therefore, to refund to the assessee that part of the sale/purchase price, which had earlier been retained by them. The assessee and Chunilal Pranjivandas & Co. agreed that the amount should be kept as a deposit with the latter at current bank rate of interest. If a resu....
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...., rules or by issue of any Ordinance out of the deposit amount, the party of the second part will refund to the party of the first part such amount relating to each accounting year after completion of 5 years from the accounting year, i.e., the amount of deposit relating to Samvat year 2020 will be refunded after Kartak Sud 1, Samvat year 2025 and that for Samvat year 2021, will be refunded after Kartak Sud 1, Samvat year 2026 and so on. "The party of the first part authorises the party of the second part to make payment of any such tax, interest or penalty, which they might be asked to pay as a result of any change in law, rules or issue of any Ordinance or Notification from the deposit lying with them, as provided in cl. (1) or any oth....
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....ade to meet the sales tax liability of Chunilal Pranjivandas & Co. This was not a liability of the assessee. Any agreement made by the assessee for meeting the sales tax liability of Chunilal Pranjivandas & Co. cannot have retrospective effect, as there was no agreement prior to sales that the assessee would pay their sales tax. The CIT(A) found that for the asst. yr. 1975-76, a sum of Rs. 2,061 related to the assessee's own liability. For the year 1976-77, the assessee's own liability was Rs. 3,913. The allowability of the rest, viz., Rs. 18,457 for 1975-76, Rs. 42,842 for 1976-77 and Rs. 1,33,853 for 1977-78 was considered by the CIT(A). The relevant extracts form his order for 1975-76 are given below: "As regards the balance of Rs. 18....
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....the part of the assessee to pay Central Sales Tax. The deduction allowed in this behalf by the CIT(A) was erroneous. 4. The ld. counsel for the assessee, on the other hand, submitted that the assessee did not receive the full sale proceeds of cotton sold by it in the first instance. Part of the purchase price payable by Chunilal Pranjivandas & Co. was retained by it, but as a deposit on behalf of the assessee subject to the discharge of any further sales tax liability that might arise. Such a contingency arose during the relevant years of account. The credit not received by the assessee was bifurcated into the amounts receivable towards sales effected in various years and were taxed as per the directions of the Tribunal in its order in I....
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....pts in the years in which the sales took place. In other words, the sum of Rs. 3,24,065 had to be analysed ; the ITO had to determine how much of it relates to each of the year which the transactions have taken place and then tax them in the respective years. But the question here is the liabilities which the assessee has now to discharge. Since Chunilal Pranjivandas & Co. had to pay sales tax, it would have deducted the corresponding amount from the amounts it had to pay to the assessee. At the time the agreement was entered into, there was no sales tax liability. Therefore, part of the sale proceeds of the assessee was treated as a deposit on favour of the assessee and retained by the purchaser. In case of any liability arising in future,....