TMI Blog1987 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... ed company incorporated under the Companies Act, 1956. It carries on the business of manufacture and sale of steel tubes. In respect of tubes, for the year 1962-63, it was liable to pay sales tax under the Central Sales Tax Act, 1947. Under the scheme of the sales tax law, a dealer is liable to pay the tax on the turnover of the sale. The rate of tax depends on the nature of sale. A dealer is liable to file the return and along with the return pay the tax admitted to be the liability. If the returned figure is accepted by the assessing authority, the assessment is completed. Where the assessing officer requires examination of the accounts for examining the correctness of the return, he calls upon the dealer to produce the accounts and on ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no dispute that the mercantile method of accounting is employed by the assessee. In this method, entries are posted in the books of account on the date of transaction, i.e., on the date on which rights accrue or liabilities are incurred, irrespective of the date of payment. (See CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122 (SC) and State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC) ). Even when the assessee failed to post the entry in its books of account, it would be entitled to the benefits since the same would depend on the provision of law relating thereto and not on the view which the assessee might take of his rights since the existence or absence of entries in the books of account cannot be decisive or conclusive in the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracted. Although that liability cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment. It is significant that in the present case, the liability bad even been quantified and a demand had been created... It is not possible to comprehend how the liability would cease to be one 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 with regard to the quantum of liability, etc. An assessee who follows the mercantile system of accounting is entitled to deduct from the profits and gains of the business such liability which had accrued during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and in view of the fact that it regularly keeps its books of account adopting the mercantile system, it can claim the deduction under section 37 during the assessment year 1971-72 since the liability was of the year 1970-71. Reliance has been placed by Mr. B. K. Mohanty, on a, decision of the Gauhati High Court in CIT v. Nathmal Tolaram [1973] 88 ITR 234. Mr. S. C. Roy, learned standing counsel for the Revenue, relied upon the decisions of the Kerala High Court in L. J. Patel Company v. CIT [1974] 97 ITR 152 (Ker) and of the Bombay High Court in CIT v. Tata Chemicals Limited [1986] 162 ITR 556. Each of the decisions is correct on its own facts. Accordingly, they are not required to be discussed. Thus, on analysis, it can safely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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