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TMI Blog1982 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... les tax amounting to Rs. 13,538. There remained with the assessee the balance amount of Rs. 11,675. For the assessment year 1968-69, the assessee collected sales tax amounting to Rs. 35,690, out of which it paid sales tax amounting to Rs. 15,974. There remained with the assessee the balance amount of Rs. 19,716. The, assessee showed these amounts in a separate sales tax account and did not bring these amounts into its profit and loss account. The ITO treated these two amounts of Rs. 11,675 and Rs. 19,716 as income of the assessee for the two relevant years. The view taken by the ITO was upheld by the AAC as well as by the Tribunal. From the decision of the Tribunal, at the instance of the assessee, the following question of law has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that it should be allowed, in any event, as a deduction under the provisions of s. 37(1) of the I.T. Act, 1961. MT. S. J. Mehta further submitted that the assessee follows the mercantile system of accounting. Under the mercantile system of accounting, the liability to pay the sales tax should be allowed to be deducted in the year in which it arose. Hence, for the relevant years the excess amount of sales tax in the hands of the assessee should be adjusted against its liability to pay this amount over to the sales tax authorities In Support of his submission, he relied upon a decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363. In that case the Supreme Court held that the assessees followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible for us to apply to the facts of the present case, the ratio of the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. [1971] 82 ITR 363. Mr. Mehta argued that this ground was mentioned in the grounds of appeal before the Tribunal. It is not possible for us to go into the grounds of appeal. There is also nothing to show that this ground of appeal was argued before the Tribunal. Had such a point been argued before the Tribunal, it should have been reflected in the agreed statement of the case. In any event, the assessees ought to have got the statement of the case amended so that it would have reflected this submission made by the assessees. When the matter goes back before the Tribunal after the present referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther held that if and when the assessee paid the amount collected to the State Government or refunded any part thereof to the purchaser, the assessee would be entitled to claim a deduction of the sum so paid or refunded. In view of these two decisions of the Supreme Court, which apply to the facts of the present case, the excess sales tax which has been collected by the assessees must be viewed as a trading receipt and liable to be included in the income of the assessees for the relevant assessment year. In view of the observations of the Supreme Court in the above two decisions, it will be open to the assessees to claim the amounts as a deduction as and when either they pay the amounts to the sales tax authorities or refund the amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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