TMI Blog1974 (6) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... the said auction business the assessee received goods from the owners and stored the same in his auction room and sold these to the highest bidder in auction in consideration of commission from the owner of the goods. When the goods were sold to the highest bidder, the assessee charged in his bills of cash memos the sale price together with the sales tax thereon and realised the same from the purchasers. The sales tax thus realised was credited to the sales tax account. For the assessment year 1962-63, the amount of such sales tax realised by the assessee was Rs. 59,330 and for the assessment year 1963-64 such amount was Rs. 20,060. It may be mentioned that there was a dispute as to whether in its auction business the assessee was liable under the provisions of the Bengal Finance (Sales Tax) Act, 1941, to pay sales tax. The assessee had disputed such liability and had not deposited the sales tax realised by it with the Government, nor was any sales tax assessment made against the assessee for the years under consideration. This dispute between the Government and the assessee was considered by the High Court in the case of Chowringhee Sales Bureau Ltd. v. State of West Bengal [1961] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere assessable as such. As to the question whether the assessee could claim deduction in respect of the liability for sales tax, the Tribunal, following the decision of the learned single judge in Chowinghee Sales Bureau P. Ltd. v. State of West Bengal [1961] 12 STC 535 (Cal), held that the assessee had no such liability. The Tribunal was also of the opinion that the position at the end of the previous year was that the assessee's liability to sales tax was at best controversial, though not in respect of these years. There was, therefore, according to the Tribunal, no definite and ascertained liability of the assessee to pay the sales tax. The Tribunal, therefore, confirmed the order of the Appellate Assistant Commissioner and dismissed the appeal of the assessee. In the circumstances, the Tribunal has referred the aforesaid two questions to this court. In order to determine the question it will be necessary to bear in mind the following facts. The assessee follows the mercantile system of accounting which will be evident from the assessment orders for the two relevant years with which we are concerned. It may also be mentioned that before the Tribunal, it was contended on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess liability to sales tax which arose on the sales made by it during the relevant previous year. The assessee was entitled to the deduction of a certain sum of money being the amount of sales tax which it was liable to pay under the law during the relevant accounting year. That liability did not cease to be a liability because the assessee had taken proceedings before the 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 under section 10(1) or under section 10(2)(xv). The Supreme Court observed that whether the assessee was entitled to a particular deduction or not would depend on the provision of law relating thereto and not on the view which the assessee might have taken of his rights nor could the existence or absence of entries in his books of account be decisive or conclusive in the matter. The case of the Royal Boot House [1970] 75 ITR 507 (Cal) 1977] was sought to be distinguished by the revenue on the ground that the liability to pay the sales tax was not disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt books of the assessee would not prevent the assessing authority from treating it as trading receipt. The Supreme Court observed that the assessee would be entitled to claim deduction of the amount as and when it paid the amount to the State Government. Regarding the contention that the auctioneer could not be included as a dealer, the Supreme Court was of the view that Explanation 2 to section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, in so far as it included an auctioneer within the definition of "dealer" was within the legislative competence of the provincial legislature while legislating under entry 48 of List II of Schedule VII of the Government of India Act, 1935, relating to taxes on the sale of goods and advertisement. An auction sale, in view of the provisions of section 4 read with section 64 of the Sale of Goods Act, would have to be considered to be a sale for the purpose of the Sale of Goods Act. There was nothing, according to the Supreme Court, in entry 48 of List II of Schedule VII to the Government of India Act, 1935, which restricted the power of the legislature in the matter of imposition of sales tax to the levy of sales tax on the owner of the goods o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit deduction from this income, nor was the Supreme Court concerned with the question whether there was any liability to sales tax at all for the year for which the appeal went to the Supreme Court where money had been realised from the purchasers on account of sales tax but had not been paid to the sales tax authorities and where the assessee was not disputing liability to pay any sales tax or whether, in those circumstances, the amount received by the assessee can at all be treated as trading receipts. Counsel for revenue contended, however, that quantification was necessary to determine the quantum to which the assessee was entitled to deduction. He, secondly, contended that if in the subsequent years there was determination of liability at a lesser amount by the sales tax authorities then such determination for the lesser amount could not be termed as cesser of liability in terms of section 41 of the Income-tax Act, 1961. In those circumstances, counsel submitted, there was a possibility of evasion by the assessee if we did not read in the provision that in order to be entitled to deduction there must be quantification and that quantification should not be the estimate of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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