TMI Blog1976 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... stered firm carrying on business in cloth at Bareilly. Up to the assessment year 1960-61, the assessment was completed in the status of Hindu undivided family, which consisted of seven members including its karta, Banwari Lal. On March 31, 1960, there was a partial partition of the Hindu undivided family in regard to the business, which was taken over by three members only out of the seven, viz., Banwari Lal, karta, Madan Mohan and Ghan Shyam. It carried on the business in the status of a firm. The balance-sheet of the Hindu undivided family as drawn on March 31, 1960, consisted of a number of assets and liabilities including a credit balance of Rs. 25,230 in respect of provision for sales tax liability of the Hindu undivided family. The sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business were preserved. It was held that the sales tax computed was an allowable deduction. When the matter came up before this court, the question arose as to whether the assessee was following the mercantile system of accounting or kept its accounts on the cash system. As the order of the Tribunal was silent on this point, a Division Bench of this court by its order dated December 3, 1973, directed the Tribunal to drawup a supplementary statement of the case containing a finding with regard to the system of accounting with regard to the erstwhile family. The Tribunal has now submitted a supplementary statement of the case and returned a finding that the Hindu undivided family was adopting the mercantile system of accounting from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on June 30, 1951, to pay the bonus for 1950. The assessee was maintaining its accounts on the mercantile system. It was held that the expenditure was properly debatable in the accounting year ending on January 31, 1952, as it was in that year that the liability had accrued. The liability in the earlier years was at best a contingent liability. It might be that, so far as sales tax liability is concerned, that is not a contingent liability but inasmuch as the Hindu undivided family had been following the mercantile system of accounting and making provision for the tax only on estimate basis, it was in the year in which it was quantified finally that the actual liability for sales tax was finally determined. The excess amount over that for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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