Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1974-75 - Whether amount of tax arrears paid by assessee, a transport operator, during relevant accounting year related to prior years under Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, was not an allowable deduction for assessment year in question - Held, yes FACTS The assessee was a transport operator. For the assessment year 1974-75, the assessee claimed deduction of certain amount being tax arrears paid under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act relating to earlier years. The ITO disallowed the assessee's claim. However, on second appeal, the Tribunal held that the assessee's claim should be allowed. On reference: HELD In view of decisions in CIT v. Ambujam Bus Transports [1988] (1988) 170 ITR 415 (Ker.) and CIT v. St. George Motors [1986] 161 ITR 444(Ker.) it was to be held that the assessee was not entitled to claim deduction of tax, admittedly payable for previous year but not paid, in the accounting year in which it was paid. Note: The case has been decided in favour of the Revenue. CASES REFERRED TO CIT v. St. George Motors [1986] 161 ITR 444 (Ker.) and CIT v. Ambujam Bus Transports [1988] (1988) 170 ITR 415 (Ker.). P. K. Ravindranatha Menon for the Applicant. T C. Karunakaran for the Respondent. JUDGMENT K. S. Paripoornan, J.- At the instance of the Revenue, the following two questions of law have been referred by the Income-tax Appellate Tribunal for the decision of this court: "1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of the tax, admittedly payable for previous years but not paid, in the accounting year in which it is paid ? 2. Whether, on the facts and in the circumstances of the case and in the absence of a finding that the Department had in the assessment of the assessee refused to allow the tax under the Taxation of Passengers and Goods Act, the Tribunal is right in law and fact in finding that this element of tax expenditure would not have gone into the computation of the estimate of income in the previous year ' and is not the above…

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