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TMI Blog2000 (3) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 1988 that no purchase tax was payable by the assessee. However, the Sales Tax Department did not accept the said order of the Sales Tax Tribunal and filed the revision before the Hon'ble Allahabad High Court. In respect of the purchase tax paid by the assessee during the assessment years 1978-79 to 1987-88, aggregating sum of Rs. 61,75,888 the assessee had deducted the said sum in the computation of income from the book profits and the same was allowed deduction with respect to the said sum in computing the income for the said earlier years in which the payments were made. On deciding the second appeal by the Sales Tax Tribunal in favour of the assessee, the assessee during the relevant assessment year under appeal, credited the said sum of Rs. 61,75,888 in the Profit & Loss Account of the relevant previous year as a deduction from the cost of purchase of the raw materials. However, for the purpose of computing the income chargeable under the head "Profits & Gains of business" for the assessment year under appeal, the assessee claimed that the said sum was not chargeable to tax under section 41(1) of the Act, since as at the end of the relevant previous year there was no cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. It is observed that the assessee also stated before the Ld. Commissioner (Appeals) that the Allahabad High Court had given the judgment on 3rd January, 1991 against the assessee company by holding that the assessee was liable to pay the purchase tax and the assessee had filed S.L.P. to the Supreme Court and at that time the matter was sub-judice. The Ld. Commissioner (Appeals) on the basis of the submission of the assessee and the cases cited before him on behalf of the assessee held that there was no finality in respect of the liability of the purchase tax and unless the decision is pronounced by the Court, it cannot be held that there has been cessation of liability on the part of the assessee. The Ld. Commissioner (Appeals) held that the Assessing Officer was wrong in taxing the said sum of Rs. 61,75,888 under section 41(1) of the Act. Hence, the department has filed appeal against the said order of Ld. Commissioner (Appeals) before the Tribunal. 4. During the course of hearing of the appeal, the Ld. Departmental Representative Sri T.M. Das justified the addition made by the Assessing Officer under section 41(1) of the Act on the basis of the order passed by the Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount could not be included in the total income of the assessee if an appeal is pending before the higher forum and there is no final decision thereon. In this regard Sri Mitra also placed reliance on the decision of the High Court of Gujarat in the case of Visnagar Taluka Audyogik Sahakari Mandli Ltd. v. CIT [2000] 242 ITR 627 and the decision of the Calcutta Bench in the case of Sreepati Hosiery Mills (P.) Ltd. v. Dy. CIT [1998] 64 ITD 170. 6. Sri Mitra submitted that in view of the decision of the Hon'ble Supreme Court which has been delivered after the end of the relevant previous year and the liability of the assessee with respect to the purchase tax which it had earlier paid had actually been confirmed and as such the assessee would never be subjected to tax under the said section with respect to the impugned sum of purchase tax amounting to Rs. 61,75,888. The order of the Commissioner (Appeals) is justified in law. 7. We have considered the rival submissions, relevant facts and the materials on record. We have also gone through the case laws on which reliance was placed by the assessee's representative. In so far as the facts are concerned, there is no dispute that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year. 8. Be that as it may, we also hold that the order of the Ld. Commissioner (Appeals) is in conformity with the law laid down by the Apex Court and as such the direction given by the Ld. Commissioner (Appeals) to hold that the Assessing Officer was wrong in taxing the sum of Rs. 61,75,888 under section 41(1) of the Act in the facts and circumstances of the case is to be upheld. 9. The sole question in the present case is whether the assessee's liability with respect to the said sum had actually ceased during the relevant assessment year and the amount could not be held to be taxable under section 41(1) of the Act in view of the fact that the Sales Tax Department had not accepted the order of the Sales Tax Tribunal and filed the appeal against it before the High Court. In our opinion, in such a situation, the liability cannot be said to have ceased because until a matter reached its finality, the liability cannot be said to have ceased to exist and accordingly, the amount cannot be made as taxable under section 41(1) of the Act. In this regard, we consider it relevant to state section 41(1) of the Act as it stood at the relevant time. Section 41(1) reads as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Subsequently, the High Court decided the issue in favour of the assessee and quashed the order of the Central Excise Department levying the excise duty on the assessee. The Central Excise Department did not accept the verdict of the High Court and preferred an appeal against the said order before the Hon'ble Supreme Court. During the pendency of the appeal filed by the Central Excise Department before the Hon'ble Supreme Court, the Assessing Officer held that in view of the favourable order of the High Court in favour of the assessee, the liabilities towards excise duty had ceased to exist during the relevant previous year and accordingly, proceeded to subject to tax the said sum of excise duty as income of the assessee under section-41(1) of the Act. It was held in the above case that the matter could not be held to have attained finality as at the end of the relevant assessment year, the appeal filed by the Central Excise Department before the Hon'ble Supreme Court was pending. Therefore, the decision of the High Court had lost its finality as a result of the appeal filed against it. It was further held that a decision liable to appeal may be final until the appeal is not prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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