TMI Blog1976 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... s admissible deduction as sales tax payable by the assessee under the Andhra Pradesh General Sales Tax Act, 1957, as amended by the Act 9 of 1970 for the assessment year 1969-70 ? " M/s. Buddala China Venkata Rao Co., Attili, the assessee, is a firm carrying on business in jaggery and chillies oil commission basis. In the financial year 1968-69, the firm collected a sum of Rs. 51,220 as " rusum " (local equivalent of sales tax). This amount represented the sales tax payable oil jaggery transactions of that year. In the case of rusum for chillies, the Income-tax Officer, in the assessment order for 1968-69, held that the it rusum " was payable to the sales tax department but the amount of Rs. 51,220 collected as rusum for jaggery was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ju v. Commercial Tax Officer [1967] 20 STC 501 (AP). To get over the effect of the decision of this court, Amendment Act 5 of 1967 was enacted. A new section 11 was substituted with retrospective effect from 1st August, 1963, enabling the sales tax authorities to levy and collect the tax from the agents de hors the liability of the principals in respect of the turnover of the principal specified in sub-section (1) of section 5 of the Act 6 of 1957. The commission agents again successfully challenged the amended provisions as discriminatory. The decision is K. Venkata Ramana v. State of Andhra Pradesh [1969] 24 STC 367 (AP). The principal Act was amended for the third time by the A. P. General Sales Tax (Amendment) Act (Act 9 of 1970). Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax [1974] 97 ITR 615. He contended that the amount in substance was a trade receipt. In the account books of the assessee the amount was credited and, it is argued, the assessee treated the amount as trade receipt, yet it did not pay the amount to the exchequer nor paid the amount to the purchaser (the principal). Therefore, it is argued, this decision of the revenue that the amount is the trade receipt of the commission agent is correct. The method of accounting followed by the assessee is the mercantile system. The effect of the receipt of amounts subsequent to the financial year and as to how such amounts could be treated and for what year of assessment directly arose in the case of Commissioner of Income-tax v. Gajapathy N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e right to receive the amount arose. The ratio of the decision in Commissioner of Income-tax v. Gajapathy Naidu [1964] 53 ITR 114 (SC) has a large bearing in the instant case in deciding whether the amount in question is the " income " of the assessee, for the amount represented sales tax payable to the Government as per the account books of the assessee. The effect of retrospective legislation was considered by the Supreme Court in Venkatachalam, Income-tax Officer v. Bombay Dyeing Manufacturing Company Ltd. [1958] 34 ITR 143. The assessee in that case was given credit of Rs. 50,063-15-0 on tax paid under section 18A of the Indian Income-tax Act, 1922. There was an amendment to section 18A by which a proviso was added. If the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not possible to comprehend how the liability would cease to be one because the assessee bad 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 period for which the profits and gains were being computed. It can again not be disputed that the liability to payment of sales tax had accrued during the year of assessment even though it had to be discharged at a future date." Therefore, applying the ratio of these cases and having regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions in favour of the assessee. The amount of Rs. 51,220 is not the income of the assessee and is admissible deduction is the amount is payable by the assessee to the sales tax authorities. Sri Rama Rao brought to our notice the opinion of this court in R.C. Nos. 1, 2, 3 and 49 of 1975 dated June 18, 1976 [P. Krishna Rao v. Commissioner of Income-tax [1978] 112 ITR 26 (AP)] wherein on identical question different view was taken by this court. We are unable to follow the decision for the reason that the earlier opinion in R.C. No. 35/74, decided on 15th December, 1975 (Additional Commissioner of Income-tax v. T. Nagireddy Co. [1976] 105 ITR 669 (AP)) on identical questions, was not referred to in R.C. No. 1/75 batch, and also becau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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