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1997 DIGILAW 1287 (MAD)

Commissioner of Income Tax v. S. Ayyadurai

1997-11-12

N.V.BALASUBRAMANIAN, P.THANGAVEL

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Judgment :- N. V. BALASUBRAMANIAN, J. At the instance of the Revenue, the Tribunal, Madras Bench 'B', Madras, has stated a case and referred the following questions of law under s. 256(2) of the IT Act, 1961, for our opinion: "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the disallowance of Rs. 36, 377 claimed as sales-tax liability by the assessee for the asst. yr. 1974-75 ? (ii) Whether the Tribunal's view that the sales-tax liability, subsisted at the close of the accounting year and, therefore, it has to be allowed as a deduction is sustainable in law in view of the fact that such a liability was wiped out as a result of the order of the sales-tax Appellate Tribunal ?" 2. The assessee is an individual and during the course of the assessment proceedings for the asst. yr. 1974-75, the assessee claimed a deduction for a sum of Rs. 36, 377 for the sales-tax payment in the computation of the business income. The ITO held that the claim was not admissible as this Court, in assessee's own case under the provisions of the Tamil Nadu General Sales-tax Act, relating to the accounting year 1967-68 in T.C. No. 154 of 1971, dt. 3rd March, 1976, held that the act of forwarding the gift articles in a circulation scheme adopted by the assessee to successful subscribers was not a sale since the element of sale was not present and as such there was on liability under the provisions of the Tamil Nadu General Sales-tax Act 3. The ITO following the decision of this Court held that the assessee is not entitled to the deduction as claimed by the assessee 4. The assessee preferred an appeal before the CIT(A) who confirmed the order made by the ITO. Aggrieved, the assessee filed an appeal before the Tribunal, Madras Bench 'B', Madras, and the Tribunal held that it was incurred to state that the sales-tax demand for that year had ceased, as the matter was pending before the Supreme Court. The Tribunal held that the liability was subsisting on the last day of the accounting year, the assessee would be entitled to the deduction of sales-tax liability to the extent of Rs. 36.337. The Tribunal held that the liability was subsisting on the last day of the accounting year, the assessee would be entitled to the deduction of sales-tax liability to the extent of Rs. 36.337. The Tribunal also held that if there is a refund or remission of sales-tax it would attract s. 41(1) of the IT Act 5. On the basis of the directions of this Court, the Tribunal has stated a case and referred the question of law as stated above 6. Mr. C. V. Rajan, learned standing counsel for the Revenue, has fairly brought to our notice, the decision of the Supreme Court rendered in assessee's own case in State of Tamil Nadu vs. Sri Srinivasa Sales Circulation wherein the apex Court considered the question of levy of sales-tax with reference to the circulation sales adopted by the assessee and the Supreme Court held that the transactions involved in the scheme of circulation adopted by the assessee, was liable to sales-tax under the provisions of the Tamil Nadu General Sales-tax Act as a transaction amounted to nothing but a sale and was, therefore, liable to sales-tax. In view of the decision of the Supreme Court holding that the transaction would attract the provisions of the Tamil Nadu General Sales-tax Act and attract the liability under the said Act, we are of the opinion that the Tribunal has come to the correct conclusion holding that there was a liability towards sales-tax by the assessee and the assessee is entitled to claim deduction of the sales-tax claimed by him. Though the decision of the Supreme Court was rendered on 4th October, 1996, we are of the view that the decision of the Supreme Court related back to the relevant previous year and the liability claimed by the assessee must be held to be subsisting even at the end of the previous year, notwithstanding the fact it was disputed by the assessee before the higher forums. Hence we are sustaining the order of the Tribunal on a different reasoning, and we hold that the order of the Tribunal holding the allowance claimed by the assessee for the sales-tax liability for the asst. yr. 1974-75 is proper. Accordingly, we answer both the questions of law referred to us in the affirmative and against the Department. No costs.