1992 (9) TMI 122 - AT - Income Tax

Summary

Issues:
- Dispute over purchase tax liability for assessment years 1982-83 and 1983-84.
- Justification of CIT(A) holding no purchase tax liability against the assessee.

Analysis:

Issue 1: Purchase Tax Liability for Assessment Year 1982-83
The assessee debited Rs. 10,14,637.21 towards provision for purchase tax, including taxes in Tamil Nadu. The Dy. CTO exempted the assessee from paying purchase tax in Tamil Nadu, but the provision was made before receiving the order. The ITO included the provision in the total income, considering potential exemption for sea food products in Kerala. The CIT(A) upheld the ITO's decision, stating the provision was against an imaginary liability. The ITAT held that the provision was valid due to the apprehension of a purchase tax liability, as evidenced by pending assessments and notices, allowing the appeal.

Issue 2: Purchase Tax Liability for Assessment Year 1983-84
For this year, the assessee provisioned Rs. 7,80,222 for purchase tax liability. The ITO disallowed the provision as imaginary, similar to the previous year. The CIT(A) supported the ITO's view. However, the ITAT, considering the pending assessments and notices indicating potential liability, allowed the appeal, stating the provision was justified due to the apprehension of a purchase tax liability.

Conclusion
The ITAT ruled in favor of the assessee, allowing the appeals for both assessment years. The tribunal emphasized the validity of the provision for purchase tax liability based on the apprehension of liability, as supported by pending assessments and notices, overturning the decisions of the CIT(A) and the ITO.