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TMI Blog1985 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Whether, on the facts and in the circumstances of the case, the assessee was entitled to relief under section 91 of the Income-tax Act, 1961, in respect of dividends from United Kingdom ? (3) Whether, on the facts and in the circumstances of the case, the sum of Rs. 8,65,208, being excise duty arising from the Government's notification, could be allowed as deduction in the assessment year 1965-66 ? " Counsel are agreed that the first question must be answered in the affirmative and in favour of the assessee in view of the judgment of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167. The question is so answered without elaboration. Counsel are also agreed in regard to the answer to be given to the second questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that " the demand notices served on these concerns are illegal and must be quashed ". The assessee had collected excise duty on carbon dioxide from the purchasers of its soda ash after July, 1962. For the years ended June 30, 1963, and June 30, 1964, it had collected the sums of Rs. 12,14,626 and Rs. 8,65,208, respectively. These sums were credited to an account called " Carbon Dioxide Deposit Account " but were not paid to the Central Government in view of the pending writ petition. After the Supreme Court delivered its judgment thereon, these sums were credited as miscellaneous income in the profit and loss account of the assessee for the year ended June 30, 1968, and taxed in the assessment year 1969-70. In the assessment for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, it was subject to tax. The judgment of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, is the clearest answer to Mr. Jetly's submission. The assessee-company in that case followed, as the assessee before us does, the mercantile system of accounting. It incurred the liability of a certain amount on account of sales tax determined to be payable by the sales tax authorities on sales made by it during a particular previous year. demand for sales tax was raised pending the income-tax assessment for that year. The Income-tax Officer rejected the assessee-company's claim for deduction of that amount on the ground that it had contested the sales tax liability and had made no provision in its books in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aks Bureau P. Ltd. v. CIT [1973] 87 ITR 542. The appellant before the Supreme Court was an auctioneer. In respect of the sales effected by it as an auctioneer, the appellant realised during the relevant period certain amounts as sales tax. These were credited in its account books under the head " Sales tax Collection Account". The appellant did not deposit the amounts in the State exchequer because it took the position that the statutory provision creating the liability upon it was not valid. The appellant also did not refund the amounts collected. It was held that the amounts realised as sales tax by the appellant in its character as an auctioneer formed part of its trading or business receipts. It did not make any difference that the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981] 130 ITR 267. This is apposite to the facts before us. The assessee company was engaged in the manufacture of nylon yarn and was informed by the excise authorities that it was liable to pay excise duty on its production of polymer chips. The assessee disputed its liability on the ground that the polymer chips were utilised by itself in the manufacture of nylon yarn. The Assistant Collector of Excise held that the assessee was liable to pay excise duty. No demand notice was, however, served upon the assessee. The assessee made a provision for the liability for excise duty in its accounts, which were maintained on the mercantile system, and claimed the amount so provided as business expenditure. The Calcutta High Court held that the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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