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TMI Blog1982 (4) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... it balance of the above amounts in the respective assessment years in the account styled as 'deposit sales tax account'. They were shown as liability under current liabilities. The ITO noticed that the assessee had effected collections under 'deposit sales-tax' in the sale bills in respect of sales made by it on permits to various parties nominated by the Government. The assessee had explained before the ITO that the above amounts collected from the customers were, according to them, not liable to income-tax, that in case the sales were held to sales tax the above amounts would be paid to the Government and in the alternative, if the sales were held to be exempt, the amounts collected would be refunded to the various customers. It was claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort certain decisions of the Supreme Court seem to have been relied on. But the department did not agree as far as the sale of ravva was concerned as sales tax was to be levied at the point of first sale by the manufacturer. The company appears to have gone on appeal to the Assistant Commissioner (Commercial Taxes) who allowed the appeal and set aside the assessment. But the Deputy Commissioner (Commercial Taxes) revised the orders of the Assistant Commissioner restoring the original assessments. Against this, the company went on appeal to the Sales tax Appellate Tribunal which by its order dated 29-12-1971 agreed with the appellant and set aside the orders of the Deputy Commissioner. Thus, the question of assessing the sales of ravva made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pending before the Andhra Pradesh High Court who granted stay of collection of the taxes on payment of Rs. 2 lakhs after a bank guarantee was furnished, and that in relation to the assessment year 1975-76 onwards, whatever was collected by the company on this account was paid to the sales tax department in the subsequent year and that thus the collections were treated as a liability to the sales tax department. The Commissioner (Appeals), after referring to the rulings of the Calcutta High Court in the cases of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1977] 110 ITR 385, CIT v. Ashoka Cement Ltd. [1979] 117 ITR 709 and CIT v. Rajeshwari Distributors (P.) Ltd. [1980] 125 ITR 618, of the Andhra Pradesh High Court in the case of Nagi Reddy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed part of the assessee's trading receipts but he was not justified in making a net addition of this amount while computing the total income of the assessee for the assessment years 1973-74 to 1975-76. Against these orders of the Commissioner (Appeals) the revenue has come up in appeal before us. 3. The learned departmental representative at the outset submitted that the sales tax collected by the assessee on the sales was not brought to the profit and loss account but was separately credited to a separate account called 'deposit sales tax account'. The learned departmental representative referred to the ruling of the Andhra Pradesh High Court in the cases of T. Nagireddy and Buddala China and pointed out that in those cases the method o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s never taken into account in the profit and loss account and neither the payments were claimed as expenditure, nor receipts were shown as income. It is, therefore, not correct to say that a cash system was followed in respect of the above deposit account. In this connection he referred to the Supreme Court ruling in the case of Kedarnath Jute and pointed out that the existence or absence of entries in its books of account was not decisive of the matter and that the mere fact that the assessee failed to credit entries in the books of account would not debar it from claiming the same as deduction. He also referred to the ruling of the Bombay High Court in the case of CIT v. Central Provinces Manganese Ore Co. Ltd. [1978] 112 ITR 734 in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, as pointed out by the learned counsel, the assessee has followed the mercantile method of accounting in respect of sales tax collections with reference to transactions other than with parties nominated by the Government, in respect of which the liability to sales tax is being contested. In respect of these transactions even according to the revenue the payments were not claimed as expenditure and receipts were not shown as income. The above position does not support the plea of the revenue that assessee was following the cash system of accounting for collection of sales tax. The case of the revenue before us is heavily stressed on the ground that the assessee was following the cash system of accounting when as a matter of fact the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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