TMI Blog1991 (6) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... al was justified in law in holding that the claim of deduction of Rs. 3,07,334 being market fees levied in 1977-78 up to March 31, 1979, from two per cent. to three per cent., the liability of which was provided and was written off in 1979-80 but the same was re-levied on 1980-81, was an allowable deduction in the assessment year 1983-84 ?" The facts, inter alia, as appear from the statement of case are that the assessee is a resident company. The assessment year involved in question is 1983-84. The accounting period relevant to the assessment year ended on March 31, 1983. The Assessing Officer completed the assessment for the assessment year 1983-84 under section 143(3) of the Income-tax Act, 1961, on February 28. 1986. In the course of the assessment proceedings, the Assessing Officer found that a sum of Rs. 3,07.334 was debited on March 31, 1983, on account of market fee levied in the financial year 1980-81. He further found that the amount was included in the purchase account. The Assessing Officer relied on the relevant entry in the journal in respect of this amount by translating the extract from the journal book for the year ending on March 31, 1983. These entries are as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the accounting period by the Collector on March 4, 1983. The Revenue's grievance is that the letter dated March 4, 1983, from the Tahsildar was only for the realisation of arrears of demand as the demand has rightly been raised when the Market Committee, Sirsa, asked the assessee to deposit the amount of Rs. 3,37,579.90 by December 10, 1980. The Tribunal took the facts and legal aspects of the demand of market fees into consideration. The Tribunal relied on the two judgments of this court in the cases of CIT v. Orient Supply Syndicate [1982] 134 ITR 12 and Shalimar Chemical Works Pvt. Ltd. v. CIT [1987] 167 ITR 13 and held that the liability was allowable in the assessment year 1983-84. The Department's grievance is that the Tribunal has ignored the principles laid down by the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363. It has been submitted by learned counsel for the Revenue that the decision in CIT v. Orient Supply Syndicate [1982] 134 ITR 12 (Cal), is not applicable to the facts of the present case. It is well-settled that, unlike the cash system of accounting, in the mercantile system of accounting, the assessee is entitled to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, other categories of employees also were brought within the purview of the Act. The employers did not accept the extended definition of "employees" in the substituted section and challenged the validity of the same in different High Courts. The Calcutta and Delhi High Courts held against the employers but the Madras High Court took a different view. The Employees' State Insurance authorities preferred appeals from the decision of the Madras High Court. The assessee-company which came within the purview of the substituted section 2(9) of the Act became liable to contribute for insurance to the Employees' State Insurance Corporation but did not make any contribution as required by the substituted section nor did it initiate any proceedings challenging the substituted section 2(9). The Employees' State Insurance authorities informed the assessee in January, 1974, about the decisions of the courts and also demanded contributions as per the substituted section. On a further demand being made by the authorities on February 20, 1974, the assessee agreed to pay the contribution as demanded. For the assessment year 1975-76, the assessee claimed deduction of Rs. 45,191 as expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the assessee contesting its liability to pay the sales tax ultimately failed. On the aforesaid facts, it was held that the moment a dealer made either purchases or sales which were subject to sales tax, the obligation to pay the tax arose. Although that liability could not be enforced till quantification was effected by assessment proceedings, the liability for payment of tax was independent of the assessment. The assessee which followed the mercantile system of accounting was entitled to deduct from the profits and gains of its business liability to sales tax which arose on sales made by it during the relevant previous year. The assessee was entitled to the deduction of the sum of Rs. 1,49,776 being the amount of sales tax which it was liable under the law to pay during the relevant accounting year. That liability did not cease to be a liability because the assessee had taken proceedings before higher authorities for getting it reduced or wiped out so long as the contention of the assessee did not prevail. Further, the fact that the assessee had failed to debit the liability in its books of account did not debar it from claiming the sum as a deduction either under section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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