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TMI Blog2004 (12) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961 (hereinafter referred to "the Act"), for the opinion of this court, said to arise out of its order in I.T.A. Nos. 248 and 249 of 1985 for the assessment years 1980-81 and 1981-82: "1. Whether, on the facts and circumstances of the case, the Appellate Tribunal is correct in upholding the disallowance out of interest payable on the deposits accepted under the Companies (Acceptance of Deposits) Rules, 1975, by applying the provisions of section 40A(8) of the Income-tax Act, 1961, for the assessment years 1980-81 and 1981-82? 2. Whether, on the facts and circumstances of the case, the assessee is entitled to claim depreciation at the revised rates effective from April 2, 1983 for the assessment years 1980-81 and 1981-82? 3. Whether, on the facts and circumstances of the case, the assessee is entitled to the deduction of the sales tax liability of Rs. 28,41,461 based on the demand pursuant to the completion of the assessment on February 18, 1980, under the Central sales tax while computing its income liable to tax for the assessment year 1981-82?" The assessee is a company and the previous years relevant to the assessment years in question, ended on June 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing Co. Ltd. v. CIT [1971] 82 ITR 363. The assessee was unsuccessful even before the first appellate authority. On further appeal before the Tribunal, the Tribunal also confirmed the view of the departmental authorities, observing that the assessee-company maintains its books of account under the mercantile system of accounting and the sales tax liability pertains to the year 1976-77, though the demand notice dated February 18, 1980, was served on February 23, 1980, which fell during the accounting year relevant to the assessment year in question. The Tribunal also relied upon the decisions of the Kerala High Court in CIT v. K. A. Karim and Sons [1982] 133 ITR 515 [FB] and L. J. Patel and Co. v. CIT [1974] 97 ITR 152, while confirming disallowance of the deduction. Hence, the reference. At the time of hearing, learned counsel for the assessee contended that though the sales tax liability pertains to the period 1976-77, the assessee was not aware of the liability as there was no demand from the sales tax department till 1980. Till the demand notice was served, there was no occasion for the assessee either to make entries in the books of account or to make a claim for deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings for the period 1976-77, as the assessment for the said period had already been completed long ago. Therefore, the assessee could make a claim only for the assessment year in question. Before considering the decision of the apex court in Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363, it would be convenient to refer to the decisions of the other High Courts relied upon by the assessee. In the case of Addl. CIT v. Rattan Chand Kapoor [1984] 149 ITR 1, the Delhi High Court was considering as to the allowability of the sales tax liability. In that case admittedly, the sales tax pertains to the period 1953-54 to 1958-59. But, however, a demand for the said amount was received on February 25,1964, relevant for the assessment year 1964-65. Therefore, the assessee claimed deduction of the said demanded sales tax liability as a deduction in that assessment year. The departmental authorities negatived the claim on the ground that the liability relates to the earlier years. But, however, the Tribunal by a majority view, allowed the claim. On a reference, the Delhi High Court upheld the majority view of the Tribunal. A perusal of the facts referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability was created against the assessee. As the appeal filed by the State against the order of the High Court was pending, the Supreme Court remanded the matter to the Assessing Officer for fresh determination, giving liberty to the assessee to raise all objections. Thereafter, the Assessing Officer made assessment on August 31, 1972, i.e., the accounting year 1972, for which the relevant assessment year is 1973-74. Therefore, the assessee claimed deduction of the said quantified sales tax liability as a deduction during the assessment year 1973-74. The Assessing Officer negatived the claim on the ground that the assessee is entitled to claim deduction only during the relevant assessment year in which the sales had taken place. However, on appeal, the Appellate Assistant Commissioner accepted the claim of the assessee, on the ground that the liability in respect of the sales tax for the year 1957-58 arose only on August 31, 1972. The Revenue's appeal before the Appellate Tribunal was dismissed. Hence, the reference to the High Court. The High Court while answering the said reference, took into account the peculiar facts, as there was no liability according to the assessee, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, 1974. That was confirmed by the Appellate Tribunal and on a reference, the Calcutta High Court answered in favour of the assessee finding the peculiarity of the facts, under which the liability came to be made against the assessee only after the decision of the apex court and not during the relevant year in which the sales had taken place. In New Gujarat Cotton Mills Ltd. [1998] 230 ITR 595, the Calcutta High 22 Court, considered the claim of deduction of the additional sales tax payable for the assessment years 1961-62 to 1965-66, during the assessment years 1978-79. In this case also, the additional sales tax liability came to be raised at a later point of time that is during the relevant period covered by the assessment year 1978-79. The Calcutta High Court had expressed its opinion on the premise that the liability created was not a normal liability of paying sales tax, but an additional sales tax liability which was raised at a later point than the point of sale. Therefore, it answered the question referred to the High Court in favour of the assessee. Coming to the decision of the apex court in Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363, where the sales we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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