TMI Blog2004 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... 1978-79 and 1979-80? - We answer this question of law in the affirmative, i.e., in favour of the assessee and against the Revenue - 2. Whether the Tribunal was correct in allowing the assessee's claim for a sum of Rs. 82,077 as liability raised against him by an order of the Regional Director, E.S.I.? - We are of the opinion, that the Tribunal was not justified in allowing the deduction of Rs. 82,077 during the assessment year 1976-77 as it related to the liability which had accrued in the previous years relating to the earlier assessment years and not in the assessment year in question – This question is answered in the negative, i.e., in favour of the Revenue and against the assessee - - - - - Dated:- 22-9-2004 - Judge(s) : R. K. AGRA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The details of the said amount are given below: Rs. 1976-77 7,988 1977-78 7,470 1978-79 24,138 1979-80 19,790 In respect of the assessment year 1976-77, the respondent-assessee had further claimed deduction of Rs. 82,077 as liability raised against it by an order dated October 29, 1975, passed by the Regional Director, Employees State Insurance Corporation. This deduction was also disallowed. The Commissioner of Income-tax (Appeals) had upheld the disallowance of both the amounts. However, in the appeal filed by the respondent-assessee before the Tribunal, the Tribunal has allowed the deduction towards sales tax liability as also E.S.I. We have heard Sri Dhananjay Awast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1976-77 vide order dated October 29, 1975, which had been claimed as legitimate business deduction. It is not in dispute that the respondent-assessee had been claiming deduction of sales tax liability in the year in which it had accrued as it had been following the mercantile system of accounting. The additional amount towards sales tax liability has been created by virtue of the assessment orders passed during the previous year relevant to the assessment years in question. In the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 the apex court has held as follows: "Now, under all sales tax laws including the statute with which we are concerned, the moment a dealer makes either purchases or sales which are subject to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e last day of his accounting year and claimed that amount as a deductible allowance on the ground that he was keeping his accounts on the mercantile basis. The Madras High Court had no difficulty in holding that the assessee had incurred an enforceable legal liability on and from the date on which he received the Collector's demand for payment and that his endeavour to get out of that liability by preferring appeals could not in any way detract from or retard the efficacy of the liability which had been imposed upon him by the competent excise authority. In our judgment, the above decision lays down the law correctly." The aforesaid decision has been followed by the apex court in the case of CIT v. Kalinga Tubes Ltd. [1996] 218 ITR 164 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction. The same principle would be applicable towards deduction/contribution to be made under the E.S.I. Act and, therefore, the liability for contribution of E.S.I. would accrue in the earlier assessment year and not during the assessment year 1976-77 when the Regional Director, E.S.I., had passed the order on October 29, 1975. So far as the question of the amount paid towards E.S.I. is concerned, we find that under section 39(4) of the Employees' State Insurance Act, 1948, the contribution payable fell due on the last day of the wage period even though the respondents had been disputing their liability. Merely because the respondent-assessee had been disputing the liability and was finally settled vide order dated October 29, 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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