9911796707
TMI Blog1973 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of computation of income, profits and gains of the assessee ?" The assessee carried on the business of commission agency. It is a dealer registered under the U.P. Sales-tax Act. During the previous year relevant to the assessment year 1966-67, the assessee collected from its customers an aggregate sum of Rs. 43,165 on account of purchase tax leviable on the sale of Rab. In its books of accounts a sum of Rs. 43,165 was credited in an account styled as "Reserve for purchase tax", instead of debiting it to the profit and loss account. The assessee did so apparently because it was disputing its liability to pay the purchase tax on the ground that it was not the first purchaser of Rab and the purchase tax under Section 3D of the U.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to purchase tax by the sales-tax department in spite of its protests that it was not liable. The Tribunal found that the amount collected by the assessee as purchase tax represents the estimated sum of purchase tax which would be payable by the assessee on the transactions relating to the previous year in question. The question is as to whether in these circumstances the assessee is entitled to claim a deduction of this amount. The learned counsel for the department does not dispute that the amount in question represents liability of the assessee on account of purchase tax and any purchase tax paid or payable by an asseasee would be an allowable deduction in computing its income for the purposes of income-tax. His contention is that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar to those raised before the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income-tax. In that case also the assessee-company claimed deduction in the income-tax proceedings under the Income-tax Act of the sales-tax levied upon it. The Income-tax Officer rejected the assessee's claim for deduction on the ground that the assessee had contested the sales-tax liability in appeal and that it had made no provision in its books of accounts with regard to the payment of that amount. The Supreme Court held that the moment a dealer made either a purchase or sale, which was liable to sales-tax, the obligation to pay the sales-tax arose, and the assessee who followed the mercantile system of accounting was entitled to dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession, and, accordingly, chargeable to income-tax as the income of that previous year. The position thus is clear that the assessee is entitled to a deduction of the purchase tax in the assessment year in question and in case he succeeds subsequently in appeal, he shall be taxed again to the extent of relief granted to him. Thus, there will be no loss of revenue to the Government. For the reasons stated above we answer the question in the affi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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