1994 (11) TMI 10 - HC - Income Tax

Summary

Issues:
1. Deduction of interest paid to relatives of G. N. Agrawal.
2. Allowability of jetty charges on barge loading expenses.
3. Claiming deduction on account of gratuity liability.
4. Entitlement to deduction of sales tax claim.

Analysis:

Issue 1: Deduction of interest paid to relatives of G. N. Agrawal
The Tribunal held that the interest paid to relatives of G. N. Agrawal was not deductible due to the amount being sourced from invalid gifts. This decision was based on previous court rulings, including the decision in Gangadhar Narsingdas Agrawal (HUF) v. CIT [1986] 162 ITR 320. The court affirmed the Tribunal's decision in favor of the Revenue.

Issue 2: Allowability of jetty charges on barge loading expenses
The Tribunal also disallowed the deduction of jetty charges on barge loading expenses paid to Mahesh and Rajiv Mor as a business expenditure. This decision was supported by a previous ruling in the assessee's own case (Income-tax Reference No. 457 of 1978). The court upheld the Tribunal's decision in favor of the Revenue.

Issue 3: Claiming deduction on account of gratuity liability
Regarding the claim for deduction on account of gratuity liability, the Tribunal ruled against the assessee for not complying with the provisions of section 40A(7). The court referred to the decision of the Supreme Court in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 and upheld the Tribunal's decision in favor of the Revenue.

Issue 4: Entitlement to deduction of sales tax claim
The primary issue in this case pertained to the deduction of arrears of sales tax paid during the assessment year 1974-75. The Income-tax Officer disallowed the deduction, stating that the liability had arisen in previous assessment years and the payments were made after the accounting year under consideration. The court referred to the decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, which established that liabilities accrued during the period for which profits were computed could be deducted. The court rejected the assessee's claim, emphasizing that the liability for sales tax was enforceable from the date of demand, regardless of appeals or disputes.

In conclusion, the court upheld the Tribunal's decision that the assessee was not entitled to the deduction of the sales tax claim, affirming it in favor of the Revenue.