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TMI Blog1994 (1) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ust as also close such business whenever it was expedient so to do. Accordingly, the trustees carried on business in the name and style of Anil Engineering Trust at Coimbatore-18. 3. Clauses 14 and 15 of the said Deed read as follows: " 14. The Trust shall continue for the period of fifteen years and no part of the funds of the Trust shall revert back either to the Authors of the Trust or to the parents of any of the beneficiaries mentioned in the Trust either during the currency of the Trust or thereafter. The Trust can be put to an end to, earlier, if the Trustees decide that it is in the interests of the beneficiaries. 15. At the time of the determination of Trust as stated above the funds of the Trust with the Managing Trustee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The said issue arose this way. When it was in existence, the aforesaid private trust, it would appear, had claimed revenue deduction, on accrual basis, in a sum of Rs. 88,773 being the sales-tax collected by it but not remitted to the credit of the Government. In the assessment for the assessment year 1984-85, the said claim of the trust was negatived invoking the provisions of section 43B. It would appear that the said sum was actually paid by the assessee-firm in the relevant previous year ending on 31-3-1985. The assessee-firm claimed revenue deduction in respect of the said sum on payment basis. The Assessing Officer disallowed the assessee's claim on two counts. First, the assessee-firm had taken over the business of the erstwhile p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The trust deed gave specific powers to the trustees to put an end to the trust even before the expiry of the stipulated fifteen years' period, if they considered that it was in the interests of the beneficiaries. It was in exercise of the said powers that the trustees determined the trust on the beneficiaries attaining majority. The consequence was that the entire trust property (which was earlier managed by the trustees for the benefit of the beneficiaries) came to be handed over to the beneficiaries who, thereupon, constituted a partnership firm. Thus, this is not a case where a business belonging to 'A' was purchased for a consideration as a going concern by 'B'. It should, therefore, follow that the question of there being any outlay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the predecessor firm, taking over all the latter's assets and liabilities including a debt due from one Laxmi Trading Co. The business carried on by the predecessor firm was carried on by the assessee. The assessee also paid income-tax on the interest accruing on the debt due from the said Laxmi Trading Co. Subsequently, the assessee-company accepted a sum of Rs. 25,000 from the said Laxmi Trading Co. in full and final settlement of the money owed to it by the latter and, in the process, wrote off a sum of Rs. 15,100 as irrecoverable and on this basis, claimed revenue deduction in respect thereof. Rejecting the departmental appeal by special leave on this issue, the Supreme Court observed : "If a business, along with its assets and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les tax paid by the assessee for business done earlier by the lessor. The Assessing Officer negatived the assessee's claim. The first appellate authority allowed the assessee's claim. The ITAT restored the order of the Assessing Officer on this issue. Answering the question referred to it in favour of the assessee, the Calcutta High Court held that section 17 of the Bengal Finance (Sales Tax) Act, 1941, casts a statutory liability on the assessee (lessee) in relation to the Act, i.e., the lessee, for all purposes of the Act, was liable even for the period the lessor had run the business and he had incurred liabilities under the Act, the only exception being in respect of the liabilities which had already been discharged by the lessor. In al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired for consideration, cannot, in all cases, lead to the conclusion that the value of the liabilities must also be regarded as forming an integral part of the purchase price and be regarded as payment under capital account. In our judgment, the real nature of an outgoing represented by the discharge of the liabilities attached to a business which an assessee acquires for consideration would depend upon whether the liabilities themselves could be related to the revenue account or to the capital account, as the case may be." Applying the decision in the case of Cooke v. Quick Shoe Repair Service [1949] 30 TC 460 (KB), the High Court held that the outlay in question was not only on revenue account but also that it was necessitated by the n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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