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TMI Blog2007 (10) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT The judgment of the court was delivered by Deepak Gupta J.— The following question has been referred for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee's liability relating to sales tax amounting to Rs. 3,15,000 on account of increase in the rate of tax had arisen on February 1, 1979, the date of amendment in the sales tax law of the State of Himachal Pradesh and not in the previous year relevant to the assessment year 1983-84, irrespective of the fact that the hon'ble Supreme Court had passed a stay order in favour of the assessee on June 18, 1980, and had vacated the stay on November 18, 1982 ?" 2. The brief facts ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of decisions. In Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the apex court held that the assessee who was maintaining accounts on the mercantile system was justified in claiming deduction of the amount of sales tax which it was liable under law to pay in the relevant accounting year. 5. The apex court dealt with a totally converse position in CIT v. Hindustan Housing and Land Development Trust Ltd . [1986] 161 ITR 524. In that case, certain land belonging to the assessee had been acquired by the State. The Land Acquisition Officer awarded certain compensation. The assessee filed an appeal and the arbitrator enhanced the compensation. Thereafter, the State Government filed an appeal in the High Court. The enhanced amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year in which the tax was payable and the mere fact that the leave to appeal was dismissed by the Supreme Court in the subsequent year would not be sufficient to claim the deduction in the subsequent assessment year. This is, however, the only ruling which has been brought to our notice taking this view. 8. No doubt, under the ordinary law if an assessee is maintaining accounts on the mercantile basis the liability to pay sales tax will accrue on the date when the company becomes liable to pay the tax regardless of the fact whether the tax has been actually paid or has been quantified or not. In the present case, the factual situation is somewhat different. At the time when the assessee entered into an agreement his liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting and claimed deduction in the assessment year 1983-84 for the customs duty which was found payable in respect of the years 1975-76 to 1983-84 because in between the question relating to payment of customs duty was in dispute. The High Court held that customs duty in respect of the assessment years 1975-76 to 1983-84 which were actually paid in the year 1982 could be claimed as a deduction in the assessment year 1983-84. 11. In Alembic Chemical Works Ltd. v. DCIT [2004] 266 ITR 47, a Division Bench of the Gujarat High Court after consideration of the entire law held as follows (page 54) : "Thus, the settled position in law is that in the case of an assessee following the mercantile system of accounting a liability is said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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