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TMI Blog1979 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of sales tax amounting to Rs. 75,900. When asked to explain reason for making this provision, the assessee submitted the provision had to be made under the law, though if the product was exported out of India, he was entitled to refund of sales tax in respect of the value of the exported material. Since during the year the assessee was not sure about the prospective quantity of export, he made a provision for payment of sales-tax. 4. The ITO held that as there was no statutory compulsion on the part of the assessee to pay sales tax ''at present'', this provision was only a contingent one and, therefore, the same could not be allowed as expenditure. This amount was, therefore, added in the net income of the assessee. 5. The matter w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order for the year under appeal is silent about the method of accounting adopted by the assessee. This appears to be a slip on the part of the ITO. However, assessment order for asst. yr. 1976-77 (copy filed) shows that the Department accepted the assessee s method of accounting as mercantile. 9. The assessee entitled to compute his profits and gains of business on accrual basis. The question with regard to the liability of an assessee following mercantile system of accounting for Sales-tax was considered by the Supreme Court in Kedar Nath Jute Manufacturing Co. Ltd vs. CIT (1). Their Lordships observed as follows. '' That the moment a dealer made either purchases or sales which were subject to sales-tax, the obligation to pay the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases tax. The chart of page 1 of the compilation filed by the assessee shows provision of purchase tax amounting to 41,643 @ 3 per cent. Further, sales tax of Rs.26,209 on sales of crushed bones @ 3 per cent was also provided in the profit loss account. Addl. sales tax levy and sales tax on bardana at 1.5 per cent and 10 per cent respectively was also provided for. 11. The sales tax assessment order for this accounting period has been filed before us. It appears from this order that the STO worked out that sales under export, inter-state sales and sales within the state separately. After excluding sales under export and inter-state sales, he charged sales tax and purchase tax in respect of sales within the State of taxable goods. He det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ascertain the precise amount of refund which he was entitled to get in respect of export sales and the inter state sales. The liability thus was not a contingent liability but a definite statutory liability which had arisen as soon as the assessee made purchases and effected sales. The amount of refund was not quantified during the year and, therefore, the assessee could not indicate such an amount of the credit side of the profit and loss account. This, however, did not detract from the fact that the assessee had properly provided for his statutory liability under the ST Act. In CIT vs. Brigmohan Das Laxmen Das (2), the High Court observed as follows:- ''An assessee who follows the mercantile system of accounting should deduct from hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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