Law: Income Tax Act, 1961

Section: 28,37

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1963-64 - Assessee was wholesale trader in rice and pulses - Total sales tax on disputed turnover pertaining to assessment years 1955-56 and 1956-57 was paid by assessee before 1-4-1961 and was adjusted in accounting year relevant to assessee year in question - Whether since assessee was following mercantile system of accounting, sales tax liability arose in year in which transaction of sale or purchase took place, that was, assessment years 1955-56 and 1956-57 - Held, yes - Whether, therefore, sales tax liability did not arise in relevant assessment year and, as such, assessee could not claim deduction of that amount in relevant assessment year - Held, yes - Whether further since sales tax liability could not be said as an expenditure incurred for earning income of relevant assessment year nor could it be said as having any relation to income that was earned during relevant assessment year, amount could not be allowed under section 37 - Held, yes FACTS The assessee was a wholesale trader in rice and pulses. In respect of the assessment years 1955-56 and 1956-57, the sales tax authorities, on the basis of certain anamath accounts recovered during a raid, adopted a multiple of ten times of the turnover not disclosed in the returns and added on the same. The assessee questioned the addition to the turnover but without success. Thereafter, he filed a revision petition. The High Court by an order dated 4-9-1961, directed to adopt a multiple of seven times of the turnover disclosed in the anamath accounts. The total sales tax on the disputed turnover was paid before 1-4-1961. On the basis that only in the year of account relevant for the assessment year 1963-64, the assessee had adjusted his sales tax liability, he claimed the said sales tax liability as a deduction in his income for the previous year ending 31-3-1963. The ITO rejected this claim on the ground that the sales tax liability did not relate to the previous year ending 31-3-1963. The order of the ITO was confirmed by the AAC. On further appeal, the Tribunal observed that the sales tax liability neither…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492