9911796707
TMI Blog1996 (7) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... s as allowable deductions. However, on August 20, 1981, this court in Deputy CST v. Neroth Oil Mills Co. Ltd. [1982] 49 STC 249, held that prawns and fish purchased and exported after processing are one and the same commodity and that therefore the assessee could get exemption from purchase tax under section 5(3) of the Central Sales Tax Act, 1956. The above decision was brought to the notice of the Income-tax Officer by the audit department after the original assessments were completed. In that background, the officer reopened those assessments under section 147(b) of the Act and withdrew the deductions already allowed. The reassessments passed by the officer were confirmed by the Commissioner of Income-tax (Appeals). Being aggrieved by the said assessments, the assessee filed appeals before the Income-tax Appellate Tribunal. Two contentions were mainly canvassed by the assessee before the Tribunal. The first contention was that the reopening was bad inasmuch as no information had been received subsequent to the assessment. Secondly, it was urged that since sales tax assessments are still pending the liability to pay purchase tax continues to exist. As far as the first contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was entered into for the purpose of complying with the agreement or order received by the exporter from his foreign buyer. This would sufficiently indicate that the exemption under section 5(3) will be available only on fulfilment of the aforesaid conditions. In other words, the exemption provided under the said sub-section is not absolute or unqualified. The liability to pay purchase tax continues to exist even though the assessee files a return claiming exemption in respect of the turnover relating to the purchase of prawns in the course of export. The filing of returns is a statutory obligation under the provisions of the Central Sales Tax Act as well as the General Sales Tax law of the State. In this context, the following observation of the Calcutta High Court in CIT v. Royal Boot House [1970] 75 ITR 507 is appropriate : "It is obligatory for such dealer to file returns either annually or quarterly or monthly, as the case may be, and the tax has to be paid prior to the filing of the returns and the sales tax authorities are entitled to make assessment and demand the balance sum from the dealer. There is also provision for enforcing payment and realisation of sales tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co.'s case [1982] 49 STC 249 was pending before the Supreme Court. It indicates that the liability to pay the tax did not come to an end. Counsel for the Revenue brings to our notice that the decision of the Karnataka High Court in Sterling Foods v. State of Karnataka [1986] 62 STC 238 has been reversed by the Supreme Court in Sterling Foods v. State of Karnataka [1986] 63 STC 239. Now, the resultant position is that the processed or frozen shrimps, prawns and lobsters were commercially the same commodity as raw shrimps, prawns and lobsters. Therefore, the purchase of those commodities for the purpose of fulfilling the existing contracts for export was exempt from purchase tax by reason of the deeming provision contained in section 5(3) of the Central Sales Tax Act. Can it be said that the liability for payment of purchase tax has totally been obliterated by reason of the aforesaid decision of the Supreme Court ? No. Because what is provided under section 5(3) is not a total or general exemption. The grant of exemption is dependent on the fulfilment of conditions and till the authorities under the sales tax statutes allow such exemption the liability to pay the tax subsists. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered dealer is legally bound to disclose in his monthly or annual returns the entire turnover either exempted or non-exempted. Even if the turnover comes under the exempted category, the dealer is not absolved from his obligation to file the returns under the provisions of the Act. Thus the liability to pay tax is fastened with duty or obligation, but it is not an enforceable liability when it is so accrued. The enforceability is the final stage which is dependent on the facts of each case. Here we are concerned with the question whether the provision made for purchase tax liability is an ascertained liability or not. The case of the Revenue all along is that it is not an ascertained liability because no demand has been made. The Income-tax Officer at the time of the original assessment, as could be seen from annexures A-1 to A-3, found that the provision for payment of purchase tax on the purchase of fish for the purpose of export was an allowable deduction. The amount so payable for the three years in question has been ascertained and quantified in the original assessment order. Because of this ascertained character of the provision for payment of purchase tax, deduction was or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The above decision was subsequently followed by the Supreme Court in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 and the case remanded to the Appellate Assistant Commissioner to consider the question of the assessee's claim for deduction towards the liability to pay purchase tax. The Division Bench of this court in Abad Fisheries' case [1995] 213 ITR 694, after placing reliance on the decision of the Supreme Court in Kedarnath's case [1971] 82 ITR 363 held : "The principle emanating from the above discussion is that a provision in the accounts made by an assessee following the mercantile system of accounting, for liability to sales tax, (though disputed) is yet liable to be allowed as business expenditure, if there was a bona fide reasonable apprehension on the part of the assessee that the amount will become payable. Of course, it is not every fanciful claim, based on the ipse dixit of the assessee that could form the basis of any claim for deduction of such liability. But if the assessee had a genuine ground, or reasonable basis, for apprehending that the liability may be cast on it, having regard to the view adopted by the concerned Sales Tax Department, or ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
