9911796707
TMI Blog1969 (10) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax. These facts would be relevant in connection with a contention raised by Dr. Misra appearing for the revenue. The assessee is a firm which was accorded registration under section 26A of the Income-tax Act, 1922 (hereinafter referred to as " the Act "), for the relevant assessment year 1958-59, the previous year being the period from the 9th July, 1956, to the 28th June, 1957. The firm deals in cloth on wholesale basis at Pratapgarh and it maintains its accounts on mercantile basis. It is assessed to sales tax under the U.P. Sales Tax Act on sales of cloth purchased from outside Uttar Pradesh. The assessee, however, did not maintain a separate account in respect of such sales. During the relevant year the assessee estimated such sales at Rs. 4,24,226 on the basis of the ex-U.P. purchases for which it maintains a separate account. Until the 31st March, 1956, sales tax on cloth imported from outside Uttar Pradesh was levied at six pies per rupee. On the 31st March, 1956, the Governor of U.P. issued an Ordinance (No. 9 of 1956), declaring that the turnover in respect of goods imported from outside Uttar Pradesh shall be liable to sales tax at one anna in the rupee with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t March, 1956, levying sales tax at the rate of one anna per rupee on goods imported from outside Uttar Pradesh was a valid notification. The position, therefore, is that sales tax was payable in the relevant assessment year by the assessee at the enhanced rate of one anna per rupee with effect from the 1st April, 1956. It may be noted here that an identical contention was raised before another Bench of this court in the case of Devi Das Madho Prasad v. Commissioner of Income-tax, but it was rejected. In that case, the assessee had debited its profit and loss account with the sum of Rs. 27,167 on the last date of the previous year which ended on the 28th August, 1967, as estimated sales tax liability imposed by the said notification dated 31st March, 1956, the validity of which was challenged by other dealers in this court. The system of accounting maintained by the assessee in that case was mercantile and it claimed deduction in respect of the sum of Rs. 27,167. On these facts the Tribunal held that the amount in question which was debited to the profit and loss account was at best a provision for a contingent liability which the assessee had thought fit to provide for in case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of Rs. 15,000 cannot be treated as ascertained liability and it cannot be debited in the accounts. Pathak J., on the other hand, holds that the liability to sales tax arises by virtue of the charging section, namely, section 3 of the said Act, and it arises not later than the end of the relevant assessment year. In his opinion, accrual of the liability does not depend upon assessment which merely quantifies the exact amount of sales tax payable by the assessee. It is common ground that, in the present case, no assessment had been made by the Sales Tax Officer in respect of the turnover of the material period by the last day of the relevant assessment year. I concur with the opinion of Pathak J., and, with profound respect, I am unable to share the view taken by Sahai J. I would first consider the question when a statutory liability under a taxing statute may be regarded as having been ascertained or accrued. In the case of Whitney v. Inland Revenue Commissioners, Lord Dunedin stated as follows : " Now, there are three stages in the imposition of a tax : there is the declaration of liability, that is the part of the statute which determines what persons in respect of what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be contended that the amount of Rs. 15,000 was due from the assessee as sales tax on 28th June, 1957, and, therefore, no deduction could be claimed in respect of that amount under the mercantile system of accounting followed by the assessee (page 7 of his judgment). Pathak J., on the other hand, referring to the provisions of sections 3 and 7(1) of the U.P. Sales Tax Act and rule 41(1) reproduces the following observations of Shah J. in Commissioner of Sales Tax v. Modi Sugar Mills Ltd. : " The liability of the assessee adopting the turnover of the year of assessment arises by virtue of sections 3 and 7 and rule 41 at the end of each quarter." The principles governing the accrual of statutory liability under a taxing enactment have been enunciated by the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax, which is the binding authority in point. The Supreme Court has pointed out in that case when liability to tax may be regarded as an ascertained liability and debited in the accounts as a debt owed by the assessee. In that case a sum of money was shown in the balance-sheet of the assessee as a liability as on the last day of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contingency has happened. A liability to pay income-tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability. The rate is always easily ascertainable. If the Finance Act is passed, it is the rate fixed by that Act ; if the Finance Act has not yet been passed, it is the rate proposed in the Finance Bill pending before Parliament or the rate in force in the preceding year, whichever is more favourable to the assessee. All the ingredients of a ' debt ' are present. It is a present liability of an ascertainable amount." In view of the principle formulated in the above case it may be laid down as a general rule that where the charging section in a taxing statute not only imposes the liability to tax but also prescribes the rate of tax or where the charging section is subject to the other provisions of the statute. Which prescribe the rate, the amount payable as tax is ascertainable with reasonable precision and the amount may be debited in the accounts for the relevant accounting period as an accrued liability under the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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