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TMI Blog1999 (9) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... sions made towards purchase tax amounting to Rs. 3,86,000 was not allowable expenditure ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that a sum of Rs. 3,86,000 provided by the assessee in the profit and loss account towards the liability for purchase tax for that year was not allowable expenditure, since it was not a statutory liability, overlooking the Supreme Court decision in the case of Kedernath Jute Mfg. Co. Ltd. [1971] 82 ITR 363 ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the purchase tax provision was not a statutory liability to the sales tax department ?" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Sterling, Foods v. State of Karnataka [1986] 63 STC 239, this court took the view that it could not be said that the assessee had acted fancifully or unreasonably in making the provision. Therefore, the assessee was entitled to deduction of the provision made for purchase tax liability in the assessment year 1982-83. This decision was followed in Baby Marine Exports v. CIT [1997] 225 ITR 631 (Ker). We are in respectful agreement with the above view taken in the two decisions. Learned standing counsel for the Revenue pointed out that as there is no specific finding by the authorities under the Income-tax Act that the assessee is following the mercantile system, the assessee cannot be found entitled to the benefit of the dictum laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting it could have observed that the principle in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC), cannot be made applicable in the present case, merely for the reason that the assessee is not following the mercantile system of accounting. No such reason is given in the assessment order to find that Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC), is not applicable to the assessee's case. We are, therefore, of the view that the assessing authority had no doubt that the assessee was following the mercantile system of accounting. In the light of the above, we answer all the three questions in the negative against the Revenue and in favour of the assessee. A copy of this judgment under the seal of this court and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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