9911796707
TMI Blog1956 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. The assessee adopted a system of paying sales tax provisionally, calculated on the turnover of the previous accounting year and having the liability adjusted at the end of the accounting year on the basis of the actual turnover in the accounting year and after taking into account the rebate allowable on the value of groundnuts and kernel crushed into oil. The final adjustment after the end of the accounting year resulted either in the assessee's liability to pay tax in excess of the provisional payment or a right to a refund of the excess tax provisionally paid. For the official year ending 31st March, 1945, there was a provisional demand of sales tax and a payment of ₹ 47,276. The final assessment to sales tax for the year resulted in a refund of ₹ 27,239, to the assessee. Similarly, for the official year ending 31st March, 1946, there was a provisional demand and payment of ₹ 45,315 as sales tax. The final assessment for that year resulted in a refund of ₹ 31,936. The refunds of ₹ 27,239 and of ₹ 31,936 were received on and shown in the books of the assessee under dates 18th April, 1946, and 12th November, 1946, respectively. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits tax in this manner : "Excess profits tax, however, has ended with the profits up to 31st March, 1946, and receipts or income relating to periods covered by the levy, and known to be recoverable on 31st March, 1946, clearly require to be assessed in one or the other of the various chargeable accounting periods". The Tribunal further held that while accepting the assessee's system of accounting, it was open to the Excess Profits Tax Officer to scrutinize each head of expenditure in the computation of profits made from the assessee's books and that the impugned amount represented one such head of expenditure. According to the Tribunal, rule 12 of Schedule I of the Excess Profits Tax Act "hits the facts of the case truly and squarely ....and has been properly invoked to correct the anomaly created by allowing the entire sales tax payments in the corresponding income-tax assessment, even though the payments in question are only advances, not properly ascertained till 31st March, 1946". The Tribunal further observed that if the Excess Profits Tax Officer had been so minded, he could have disallowed the whole amount of ₹ 47,276 instead of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional payments of sales tax were made in 1944-45, the assessee could not have expected the termination of the war or the expiry of the life of the Excess Profits Tax Act with 31st March, 1946. In these circumstances, there is no justification for upsetting the basis of accountancy followed by the assessee consistently, irrespective of results which might at times prove favourable but at other times work out at a disadvantage, particularly when the Department has accepted and acted upon the accounts consistently for income-tax assessments even during the chargeable accounting period. Section 21 of the Excess Profits Tax Act enacts that section 13 of the Income-tax Act shall apply to assessments under the Excess Profits Tax Act as section 13 had been incorporated therein. Under section 13 of the Income-tax Act, the assessee is free to choose a proper method of accounting and the profits and gains have to be computed in accordance with the method of accounting regularly employed by the assessee. The assessing authority is bound by the assessee's choice of a method of accounting regularly employed by him unless the income, profits and gains cannot properly be deduced therefrom. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, and it would be advantageous to the revenue to disregard the payments of the provisional sales tax made during the official year ending 31st March, 1945, by bringing into the account of that year the rebates or refunds granted on 18th April, 1946, and entered in the assessee's books under that date. The further contention urged on behalf of the Commissioner of Income-tax is that under rule 12 of Schedule I of the Excess Profits Tax Act, in computing the profits of any chargeable accounting period, no deduction would be allowed in respect of expenses in excess of the amount which the Excess Profits Tax Officer considers reasonable and necessary having regard to the requirements of the business and that the Excess Profits Tax Officer acted under that rule in the present instance. It is no doubt true that the language of rule 12 is more stringent than the corresponding language of section 10(2)(xv) of the Income-tax Act. It cannot be disputed that the expenditure in question was incurred by the assessee in his character as a trader. It cannot be stated that the payment of sales tax was made voluntarily and on grounds of commercial expediency without any actual necessity for su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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