1990 (9) TMI 42 - HC - Income Tax

Summary

Issues:
1. Whether accrued sales tax liability is an allowable deduction during the year under consideration.
2. Whether interest on fixed deposits should be taxed on maturity basis and not on accrual basis.

Analysis:
1. The court addressed the first issue concerning the deduction of accrued sales tax liability. The respondent had claimed sales tax as a liability, which was challenged but not stayed. Despite challenges, the respondent continued to record the liability in its books. The Tribunal had allowed the deduction in previous years, and even though references were dismissed by the court, the deduction was consistently allowed. The court cited the precedent set by the Supreme Court in a similar case, holding that the liability and deduction should be allowed even if under challenge. As the operation of the notification imposing sales tax was not stayed, the court upheld the deduction based on the Supreme Court's decision.

2. Regarding the second issue of taxing interest on fixed deposits, the court had previously declined to call for a reference on this matter. The court noted that the controversy was settled by the judgment of the Supreme Court in a previous case. The court emphasized that despite challenges or appeals, the liability and deduction should be allowed. As the operation of the notification imposing sales tax was not stayed, the court upheld the deduction based on the Supreme Court's decision.

In conclusion, the court dismissed the petition based on the reasons discussed above, and no costs were awarded. The judgment provided clarity on the allowance of deductions for accrued sales tax liability and the taxation of interest on fixed deposits based on legal precedents and the specific circumstances of the case.