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1973 DIGILAW 168 (KER)

L. J. PATEL AND CO. v. CIT

1973-07-12

GEORGE VADAKKEL, P.GOVINDA NAIR

body1973
Judgment :- 1. The question raised in this case and referred to us by the Income-tax Appellate Tribunal, Cochin Bench is in these terms: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was not entitled to deduction of Rs. 31, 675 being the excise duty actually paid by it in 1962 on the ground that the liability therefor had arisen in 1952?" 2. The assessee followed the mercantile system of accounting. As a result of the enhancement of the excise duty by the Finance Act, 1951, the assessee had to pay a sum of Rs.31,675 as additional excise duty. This additional duty should have been paid in the year 1952. The assesses did not pay but challenged the impost on various grounds but did not succeed. Thereafter, it paid the amount in the calendar year 1962. Its accounting period was the calendar year. It claimed the sum of Rs. 31,675/- paid as a deduction from its income for the accounting period its assessment for the year 1963-64. This has been disallowed by the Tribunal on the ground that the liability to pay excise duty bad arisen and had accrued in the year 1952 and that having followed the mercantile system of accounting, the liability cannot be taken into account in computing the income for the year 1962 for the assessment year 1963-64. 3. Apart from any reference to any decision, by merely reading S.13 of the Indian Income-tax Act, 1922 and S.145 of the Income-tax Act, 1961, one would have thought that the income chargeable under the head "profits and gains of business or profession" or "income from other sources" should be computed in accordance with the method of accounting regularly employed by the assessee. These are the words of S.145(1) of the Income-tax Act, 1961 and S.13 of the Indian Income-tax Act, 1922 is in similar terms, It has not been suggested at any time that the method of accounting regularly employed by the assessee is cot the mercantile system of accounting. If it is the mercantile system of accounting which is to be followed, the liability to pay Rs. 31.675/-sbould have been claimed as a liability for the assessment year 1950-54. The liability of a past year cannot be taken into account for computing the income of a subsequent year. If it is the mercantile system of accounting which is to be followed, the liability to pay Rs. 31.675/-sbould have been claimed as a liability for the assessment year 1950-54. The liability of a past year cannot be taken into account for computing the income of a subsequent year. Nor can the income of a year other than the relevant year whether that income accrued before or after the relevant year, be taken into account for computing the Income for the relevant year. This is the principle of the decision of the Madras High Court in Pope the Kind Match Factory v. Commissioner of Income-tax, Madras reported in ((1963) 50 ITR. 495. This decision has been specifically approved by the Supreme Court in the decision in Kedarnath Jute Mfg. Co. Ltd. v. Commr, of Income-tax (Central) Calcutta reported in ((1971) 82 ITR, 353 at page 367. 4. Counsel for the assessee invited our attention to the decision of the Assam High Court in Commr, of Income-tax, Assam v. Nathmal Tolaram reported in ((1973) 88 I.T. R.234) as also an English decision in H. Ford & Co. Ltd. v. The Commissioner of Inland Revenue reported in 12 T. C. 997. The Supreme Court decision was referred to by the Assam High Court but it was sought to be distinguished. With great respect, we are unable to agree with the view of the Assam High Court. We consider that the matter is concluded by the decision of the Supreme Court. 5. It will be unsafe to rely on English decisions which may be rendered on statutory provisions which may be different, or on principles which are applied in the absence of statutory provisions. The danger has been pointed out by the Supreme Court in Commr, of Income-tax, Madras v. A. Gajapathy Naidu reported in (1964) 53 I. T. R.114 wherein Subba Rao, J., expressed the view that the provisions of the Indian Income-tax Act, have to be construed on their own terms without drawing any analogy from English statutes whose terms may superficially appear to be similar. 6. We think that the section itself is clear and if there is any ambiguity, the matter has been settled beyond any possibility of controversy by the decision of the Supreme Court is Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax (Central), Calcutta reported in (1971) 82 I. T. R.363. 7. 6. We think that the section itself is clear and if there is any ambiguity, the matter has been settled beyond any possibility of controversy by the decision of the Supreme Court is Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax (Central), Calcutta reported in (1971) 82 I. T. R.363. 7. We answer the question referred to us in the affirmative, that is, in favour of the department and against the assessee. The department will have its costs from the assessee including counsel's fee of Rs. 250/-. 8. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.