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TMI Blog1996 (8) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) was justified when the liability pertained to earlier years and the assessee was maintaining his accounts on mercantile system? (ii) Whether the Tribunal was right in law to hold that statutory liability could be claimed by the assessee either when the event took place or when the assessments were completed under the relevant statutory law?" The brief facts giving rise to this reference are these : For the assessment year 1983-84, the assessee had claimed deduction of Rs. 40,935 towards payment of entry tax. There was no dispute that the expenditure pertained to earlier years. However, the assessee claimed deduction during the year on two grounds. The first was that the clarification as to the liability of the assessee for pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhya Pradesh, and, therefore, the assessee knew that he was under the statutory obligation to pay entry tax, whether the appeal was pending or decided. The representative placed reliance on the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, in which it was held that the moment a dealer makes either purchases or sales which are subject to sales tax, the obligation to pay the tax arises, though the liability may not be enforced till the quantification. The Tribunal did not accept this point of view canvassed by the representative of the Department and held that since the liability had accrued to the assessee during the accounting period relevant to the subsequent year 1983-84, deductions co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability will be treated to have been arisen in the year in which the demand was raised. It was observed : "Held also, on the facts, that since the entry made by the assessee was on the basis of a demand and no different system had been previously followed by him, the assessee had adopted a hybrid system of accounting which was open to him and, hence, on the principle of accountancy followed by the assessee, the amount was deductible expense for the assessment year 1964-65." The Delhi High Court also distinguished Kedarnath's case [1971] 82 ITR 363 (SC) and it was observed that Kedarnath's case [1971] 82 ITR 363 (SC), was limited to those cases in which the demand for sales tax is raised by the Sales Tax Department before the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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