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Issues:
1. Whether the Tribunal was justified in deleting the addition of Rs. 1,95,877? 2. Whether the Tribunal was justified in holding that the amount of Rs. 5,000 odd represented statutory liability and should be allowed? Analysis: 1. The case involved the assessment year 1975-76 where the assessee collected Rs. 1,95,877 as sales tax but did not pay it to the Government or refund it to customers. The Income-tax Officer treated it as part of trading receipt, includible in income when tax is paid. The Commissioner of Income-tax (Appeals) held the amount deductible when liability arises or is discharged. The Tribunal allowed the claim, stating the liability was Rs. 2,00,944, with only Rs. 1,95,877 collected. However, the High Court held that sales tax collection is a trading receipt, includible in total income, following precedent cases like Chowringhee Sales Bureau P. Ltd. v. CIT and Sinclair Murray Co. P. Ltd. v. CIT. The Court ruled that unless a statutory or accrued liability exists, deduction cannot be allowed, thus not justifying deletion of the addition. 2. Regarding the Rs. 5,000 odd amount, the Tribunal allowed it based on the difference between total liability and collection. However, the High Court emphasized that only accrued liabilities can be deducted. Since no liability accrued in the year in question and the Rs. 5,000 claim was not raised earlier, it cannot be allowed. The Court reiterated that without a statutory or accrued liability, no deduction is permissible. Citing the principles from previous judgments, the Court concluded that the Tribunal was not justified in allowing the Rs. 5,000 deduction. In conclusion, the High Court answered in favor of the Revenue, holding that the Tribunal was not justified in deleting the addition of Rs. 1,95,877 and in allowing the deduction of Rs. 5,000 odd. The judgment emphasized the importance of statutory or accrued liabilities for deductions and upheld the treatment of sales tax collections as trading receipts.
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