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TMI Blog1998 (4) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... gendum issued by the Appellate Tribunal?" Though the question of law framed at the instance of the Revenue seems to suggest that the finding of the Appellate Tribunal that the assessee was maintaining the sales tax account on mercantile basis is not sustainable in law in view of the corrigendum issued by it, the real issue that arises for consideration is, whether the assessee is entitled to get deduction of certain amount of the sales tax liability. The assessee was following the mercantile system of accounting. But, according to the Income-tax Officer, the assessee has not adopted the mercantile system of accounting in the matter of receipt and payment of sales tax alone. According to the Income-tax Officer, as and when the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies on accrual basis was brought into the trading account under 'sundry creditors' while also taking into account the sales tax collections as part of trading receipts. Therefore, on the facts, the only question that can arise is whether the liability for sales tax should be limited to the actual payment instead of the accrued liability provided in the trading account." On the basis of the above finding, the Appellate Tribunal came to the conclusion that liability towards sales tax accrued at the time of sales and was deductible on accrual basis even if the payment was postponed. The Tribunal has arrived at the above conclusion following the decision of the Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1977] 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government. Mr. P.P.S. Janarthana Raja, learned counsel for the assessee, on the other hand, submitted that the Tribunal has distinguished the earlier decision of this court in the case of E.A.E.T. Sundararaj [1975] 99 ITR 226, and the system of accounting adopted by the assessee is different and, therefore, the said decision is not applicable to the facts of this case. We have carefully considered the rival submissions of learned counsel on either side. Before considering the decision of this court in E.A.E.T. Sundararaj's case [1975] 99 ITR 226, it is necessary to notice that the assessee, though was maintaining a separate ledger for collection and payment of sales tax, according to the finding of the Appellate Tribunal, it had tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the assessee was maintaining the cash system of accounting. It is also not possible to hold that the system of accounting maintained by the assessee was cash system from the peculiar way in which the assessee had debited its accounts. Therefore, on the basis of the decision of the Supreme court in the case of Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363, the assessee would be entitled to deduction of the sales tax liability as the statutory liability had accrued at the time of sales. We are, therefore, of the opinion that the Tribunal was right in holding that the sales tax liability accruing during the year of account was liable to be deducted on accrual basis though the payments of sales tax were made later to the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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