Kerala H.C : Whether, on the facts and in the circumstances of the case, Rs. 24,578, being the amount paid by the assessee during the year ending March 31, 1973, towards arrears of tax payable under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, 1963, relating to the years 1966-67 to 1968-69, is to be allowed as a deduction in computing the assessee’s income for the asst. yr. 1973-74 ?

Counsel Appeared

P.K.R. Menon & N.R.K. Nair, for the Revenue : T.L. Viswanatha Iyer, for the Assessee

P.C. BALAKRISHNA MENON, J.:

The Tribunal, Cochin Bench, has referred the following questions for the decision of this Court under s. 256(1) of the IT Act:

“1. Whether, on the facts and in the circumstances of the case, Rs. 24,578, being the amount paid by the assessee during the year ending March 31, 1973, towards arrears of tax payable under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, 1963, relating to the years 1966-67 to 1968-69, is to be allowed as a deduction in computing the assessee’s income for the asst. yr. 1973-74 ?

2. Whether, on the facts and in the circumstances of the case, the liability to pay the aforesaid sum of. Rs. 24,678 arose during the accounting year ending March 31, 1973, by reason of the understanding arrived at between the assessee, on the one hand, and the Kerala State Government, on the other ?”

The answer to these questions is covered by our decision in ITR No. 315 of 1980 [CIT vs. St. George Motors (1987) 59 CTR (Ker) 249 : (1986) 161 ITR 444 (Ker)] and should, therefore, be answered in favour of the Revenue.

Counsel for the assessee sought to make a distinction on the ground that the liability for payment of tax under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act arose when the assessee firm took over the assets and liabilities in the transport business that was being conducted by one Balasubramaniam who was inducted as a partner of the firm w.e.f. April 1, 1970. The liability for payment of tax under the Taxation of Passengers Act was that of Balasubramaniam who was inducted as a partner of the firm in 1970. Merely for the reason that the assets taken over took in also the liabilities charged on these assets, it cannot be said that the discharge of such liabilities will be a permissible deduction during the relevant accounting period. Therefore, we answer the questions referred in the negative, that is, in favour of the Revenue and against the assessee.

[Citation : 170 ITR 415]