Patna H.C : Whether, on the facts and in the circumstances, the Tribunal was justified in law in allowing the sales tax liability in the asst. yr. 1971-72 ?

Counsel Appeared

Rajgarhia, S.K. Sharan & K.N. Jain, for the Revenue : Rameshwar Prasad & O.P. Agarwal, for the Assessee

K. SEN C, J. :

The material facts as on record and the proceedings leading up to this reference are, inter alia, that General Trading Agency, Mokamah, the assessee, is a registered partnership firm carrying on business in grains and milling cereals. The assessee follows the mercantile system of accounting.

The assessee was assessed to sales tax under the Bihar Sales Tax Act, 1959, for the period 1968-69. In the asst. yr. 1971-72, the accounting year ending on Ramanavami day, 1971, that is, April 3, 1971, the assessee was assessed to income-tax. The assessee filed its return of income on October 5, 1971, disclosing an income of Rs. 12,366. Subsequently, on September 7, 1972, the assessee filed a revised return showing loss of Rs. 24,188.

Before the ITO, the assessee contended that the loss had resulted on account of sales tax which was quantified on December 16, 1970, and claimed deduction of Rs. 46,449 in the said assessment year.

The ITO rejected the contention of the assessee and held, inter alia, that the liability for the said sales tax pertained to the period 1968-69 and not to the relevant assessment year and as such the assessee was not entitled to the deduction as claimed.

Being aggrieved, the assessee preferred an appeal from the order of assessment. It was contended on behalf of the assessee before the AAC, inter alia, that as the liability for payment of sales tax was determined on December 16, 1970, during the relevant accounting year, the same should have been allowed as a deduction. The AAC held that under the mercantile system of accounting, such liability should be ascertained and claimed in the relevant accounting year. Where the accounts were maintained on cash basis, such claim could be allowed only in the year in which the liability was actually paid. As the assessee was following the mercantile system of accounting, the claim for deduction of the liability on account of sales tax could be entertained only in the accounting year when such liability accrued. The AAC noted the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) and applying the same held that though the assessment of sales tax has been made in the relevant accounting year since the assessee had disputed the assessment and had not paid it, the assessee was not entitled to claim deduction according to his convenience in any assessment year he chose to do. He upheld the disallowance made by the ITO.

Being aggrieved, the assessee preferred a further appeal before the Tribunal. It was contended before the Tribunal on behalf of the assessee that by the order of assessment of sales tax made by the Superintendent of Commercial Taxes, Patna Circle, Patna, dated November 11, 1970, an extra demand was raised against the assessee on account of sales tax during the relevant accounting year. This was an extra demand made during the relevant accounting year and as such the deduction of the same had to be allowed in this assessment year. The assessee relied on an order of the Tribunal, in its own case relating to the earlier asst. yr. 1970-71, passed in IT Appeal No. 419 of 1974-75 where, in similar circumstances, the Tribunal had accepted the claim of the assessee for deduction on account of sales tax which was finalised in a subsequent assessment year. It was held in the earlier order that though this additional demand was being disputed in appeal, as the demand was raised against the assessee in the assessment year in question and was in addition to the amount collected by the assessee from its customers on account of sales tax, the same should be allowed as deduction in the relevant assessment year.

8. The Tribunal followed the decision of the Assam High Court in CIT vs. Nathmal Tolaram (1973) 88 ITR 234 (Gau), and held that the liability of the assessee for the said Rs. 46,948 accrued in the relevant assessment year. Following the decision in Kedarnath Jute Mfg. Co. Ltd. (supra), the Tribunal also held that the fact that the assessee had filed an appeal against the order of assessment of sales tax would not debar it from claiming deduction of the said assessed liability. The Tribunal accepted the contentions of the assessee and allowed the appeal.

9. On an application by the Revenue under s. 256(1) of the IT Act, 1961, the following question has been referred as a question of law arising out of the order of the Tribunal for the opinion of this Court :

” Whether, on the facts and in the circumstances, the Tribunal was justified in law in allowing the sales tax liability in the asst. yr. 1971-72 ?”

10. Learned advocate for the Revenue contended, at the hearing, that the law stood settled by the decision of the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd, (supra), and the liability for sales tax having arisen in an earlier assessment year, the assessee was not entitled to claim a deduction thereof in a subsequent assessment year. The fact that the liability for sales tax was not quantified earlier made no difference to the position as the same was a statutory liability and had accrued in the earlier assessment year when the transaction took place. As the assessee did not make any payment on account of sales tax pursuant to the said order of assessment in the relevant assessment year, his claim for deduction was neither on the basis of the mercantile system of accounts, nor on accounts maintained on the cash basis. In any event, it was not the case of the assessee that it maintained its accounts on a hybrid system. It was contended that the Tribunal had erred in following the decision of the Assam High Court in Nathmal Tolaram’s case (supra). The view taken by the Assam High Court had been expressly differed from by other High Courts.

11. Learned advocate for the assessee contended, on the other hand, that even if it is assumed that the liability for payment of sales tax accrued in the year in which the transaction of sale took place, till a regular order of assessment was made, it was not possible for the assessee to provide for the same in its accounts. In the instant case, the order of assessment of sales tax was passed long after the relevant accounting year for income-tax and it was not possible for the assessee to claim deduction of sales tax as assessed in the relevant assessment year. He submitted further that the principles laid down in Kedarnath Jute Manufacturing Co. Ltd. (supra) should be extended to cases where the statutory liability was finalised in a subsequent year and the assessee should be held to be entitled to claim deduction of the same in such subsequent year.

12. In support of his contentions, learned advocate for the Revenue relied on and cited the following : (a) Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (supra). In this case, the assessee which followed the mercantile system of accounting became exigible to sales tax in 1954, the relevant assessment year for the purpose of income-tax being 1955-56. A demand for sales tax for the said period was raised against the assessee by a notice dated November 21, 1957. The assessee had filed its income-tax return for 1955-56 on January 13, 1956, and filed a revised return thereafter on November 9, 1959, claiming deduction of the amount of the said demand of sales tax, which was, however, contested by the assessee in further proceedings before the higher authorities.

13. The assessee’s claim for deduction was rejected by the ITO, the AAC, the Tribunal and the High Court. On further appeal by the assessee, the Supreme Court held, inter alia, that the liability to pay sales tax arose immediately a dealer entered into transactions subject to sales tax, although the same may not be enforced till it was quantified in assessment. The Supreme Court held further that the liability for sales tax was independent of the assessment and if the assessee followed the mercantile system of accounting, it was entitled to deduct from its business profits and gains, its liability to sales tax assessed during the relevant period. On the facts, it was held that the assessee was entitled to the deduction as claimed and the liability to pay such sales tax did not cease because the assessee challenged the sales tax assessment in further proceedings or failed to debit such liability in its books of account. The same would not debar the assessee from claiming the said amount as deduction in its income-tax assessment. (b) L. J. Patel & Company vs. CIT (1974) 97 ITR 152 (Ker). In this case, upon enhancement of excise duty by the Finance Act, 1951, the assessee became liable to pay an amount on account of additional excise duty in the year 1952. The assessee, however, challenged the demand in further proceedings which did not succeed and, ultimately, the amount of excise duty was paid in 1962. On these facts, a Division Bench of the Kerala High Court, following the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra), held that as the assessee maintained its accounts on the mercantile system, it could claim deduction on account of such additional excise duty only in the year 1952 and not in the subsequent asst. yr. 1963-64 in which the additional demand was paid. The Kerala High Court noted the decision of the Assam High Court in CIT vs. Nathmal Tolaram (supra), and recorded its disagreement with the view of the latter High Court. (c) CIT vs. V. Krishnan (1979) 12 CTR (Mad) 371 : (1980) 121 ITR 859 (Mad). Here, the assessee had been assessed to sales tax in the asst. yrs. 1966-67 and 1967-68 and the demand on the said assessments was raised on the assessee on August 31, 1971. The assessee had not provided for the said liability in any of the relevant earlier years but claimed deduction of the demand in the asst. yr. 1972-73. On the facts, it was held by a Division Bench of the Madras High Court, following the decision in Kedarnath Jute Mfg. Co. Ltd. (supra), that the liability to sales tax would ordinarily relate to the year in which the transactions took place. The year in which the demand for payment of sales tax was raised was neither the year in which the liability to pay tax arose nor the year in which the assessee had paid such tax. Therefore, the assessee was not entitled to claim deduction in the assessment year in question when only the demand was raised. The Madras High Court did not accept the view expressed by the Assam High Court in Nathmal Tolaram’s case (supra). (d) CIT vs. K. A. Karim & Sons (1981) 24 CTR (Ker) 83 (FB) : (1982) 133 ITR 515 (Ker) (FB). In this case, the assessee, which kept its accounts on the mercantile system, had effected purchases between September 1972, and March 1973, which were liable to be taxed under the Kerala General Sales Tax Act. At the material time, the Government of Kerala did not take any steps to recover such tax and subsequently on October 12, 1973, a notification was issued by the Government exempting certain transactions entered into between September 1970, and September 1973. Such notification was, however, cancelled on November 9, 1973. The assessee claimed deduction of such purchase tax in the asst. yr. 1974-75. A Full Bench of the Kerala High Court, following the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra), held that the liability to pay purchase tax arose in the years when the transactions took place and, therefore, the assessee was entitled to claim deduction of tax in the said relevant years and not in the subsequent years. The notification for exemption was published in October 1973, and cancelled in November

1973, and as such did not affect the position. The Full Bench noted the decision of the Assam High Court in Nathmal Tolaram’s case (supra), and held that the said decision was rightly dissented from in the earlier judgment of the Kerala High Court in L. J. Patel and Co.’s case (supra).

Learned advocate for the Revenue also relied on and cited Buddala China Venkata Rao and Co. vs. CIT (1978) 112 ITR 58 (Pat), a decision of the Andhra Pradesh High Court, CIT vs. Rajeshwari Distributors (P.) Ltd. (1980) 16 CTR (Cal) 394 : (1980) 125 ITR 618 (Cal), a decision of the Calcutta High Court, State Bank of Travancore vs. CIT (1986) 50 CTR (SC) 290 : (1986) 158 ITR 102 (SC), a decision of the Supreme Court and CIT vs. St. George Motors (1987) 59 CTR (Ker) 249 : (1986) 161 ITR 444 (Ker), a decision of the Kerala High Court. No further light is thrown on the question involved in the present reference by the principles laid down in the said decisions and as such the same need not be considered any further.

16. Learned advocate for the assessee relied on and cited the following decisions in support of his contentions.

(a) Pope the King Match Factory vs. CIT (1963) 50 ITR 495 (Mad). Here, a demand for excise duty was raised on the assessee during a particular accounting year. The assessee objected to the same and preferred an appeal therefrom but debited the accounts on the last day of the said accounting year with the amount demanded. In the facts and circumstances, it was held by the Madras High Court that the assessee was entitled to claim deduction of the amount of the said demand for the purpose of income-tax. It was held that on and from the date on which the assessee received the demand for payment, he incurred an enforceable legal liability.

(b) CIT vs. Gajapathy Naidu (A.) (1964) 53 ITR 114 (SC). In this case, the assessee, who kept his accounts on mercantile basis, had supplied provisions to a Government hospital in Madras during a particular financial year. The amounts due on account of supply were credited in the accounts of the assessee in the relevant assessment year and the assessee was assessed to income-tax accordingly.

17. Subsequently, on a representation that the assessee had suffered loss in the transactions, an ex gratia payment was allowed to the assessee by way of compensation in a subsequent accounting year. It was contended on behalf of the assessee that the said amount received related to the transactions which took place in an earlier accounting year and could not be assessed in the subsequent year when it was received. On these facts, it was held by the Supreme Court that the assessee had received the amounts in dispute in the subsequent assessment year not on the basis of any right that accrued to the assessee in the earlier assessment year and for the purpose of income-tax the said amount had been received by the assessee only in the year when it was paid. Such income could not be held to have accrued and arisen to the assessee earlier and the same could not be related back to the earlier year on the ground that the same arose out of the earlier transactions. (c) CWT vs. Standard Vacuum Oil Co. Ltd. (1966) 59 ITR 569 (SC). In this case, it was held by the Supreme Court that an order for payment of advance tax under s. 18A of the Indian IT Act, 1922, would impose a statutory liability on the assessee to pay the same, though the assessee might submit his own estimate of income and withhold the payment as demanded. Such a demand would be a debt owed by the assessee within the meaning of s. 2(m) of the WT Act, 1957. (d) CIT vs. Nathmal Tolaram (1973) 88 ITR 234 (Gau). In this case, the assessee entered into transactions in jute during the periods ending on March 31, 1949, September 30, 1949, and March 31, 1950, for which the assessee was assessed to sales tax. The assessee filed appeals and revisions against such assessments without success. A reference to the High Court also proved unsuccessful. A conditional leave to appeal to the Supreme Court was granted with a condition directing deposit of the amount of demand with the assessee’s bankers. The assessee was ultimately unsuccessful also in the proceedings before the Supreme Court. The assessee, who maintained his accounts under the mercantile system, did not make any provision for payment of the aforesaid sales tax during the relevant accounting years when the transactions were had. In a subsequent accounting year, the relevant assessment year being 1958-59, the assessee, in his income-tax assessment, claimed deduction of sales tax to which it had been assessed. The assessee’s claim was rejected by the ITO and the AAC but was allowed by the Tribunal. On a reference, it was held by a Division Bench of the Assam High Court that in the facts and circumstances, the demand for sales tax which was made during the relevant assessment year was an enforceable liability and as such a real expenditure and, therefore, the assessee was entitled to debit its accounts with the said demand in the assessment year in question and claim deduction thereof. The amount debited represented the final demand of sales tax which the assessee was called upon to pay during the relevant assessment year and was, therefore, allowable as deduction. (e) CIT vs. Banwari Lal Madan Mohan 1977 CTR (All) 21 : (1977) 110 ITR 868 (All). In this case, it was held by a Division Bench of the Allahabad High Court that where an assessee, an HUF, had been following the mercantile system of accounting and had made provision for payment of sales tax on an estimate basis, the year in which the demand for sales tax was quantified would be the year in which the actual liability for sales tax was finally determined.

The liability for the amount in excess of what had been provided for earlier would accrue in the year in which such liability was quantified and would, therefore, be an admissible deduction in computing the assessable income in the relevant assessment year. (f) CIT vs. Orient Supply Syndicate (1981) 22 CTR (Cal) 285 : (1982) 134 ITR 12 (Cal). In this case, the assessee claimed deduction of an amount contributed as provident fund by the assessee under the Employees’ Provident Funds Act, 1952. The claim of the assessee was rejected by the ITO and the AAC on the ground that such contribu- tions related to earlier assessment years. On further appeal, the claim of the assessee was allowed by the Tribunal, which found that though there was a statutory liability on the assessee to pay its contributions under the Employees’ Provident Funds Act, no demand was enforced under the said Act against the assessee in any earlier year and only in the year in which the assessee had claimed deduction, the Regional Provident Fund Commissioner had, for the first time, called upon the assessee to make such contributions for the entire period and this was the first demand from the statutory authority for the entire period and the same was paid by the assessee in the said assessment year. It was also found that the decision of the provident fund authority was pending as to whether the assessee came within the purview of the Employees’ Provident Funds Act.

The decision of the Tribunal was upheld in a reference by a Division Bench of the Calcutta High Court. The High Court considered the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra), as also the decision of the Assam High Court in Nathmal Tolaram’s case (supra). The High Court agreed with the view taken by the Kerala High Court High Court in L.J. Patel & Co.’s case (supra) and the Madras High Court in V. Krishnan’s case (supra), but did not agree with the view of the Assam High Court expressed in Nathmal Tolaram’s case (supra).

The High Court observed as follows : ” But, here, as we have mentioned, the position is not a theoretical position as to whether a statutory liability arose in the year when it became due or when it was discharged. Here, the facts are that the assessee is a firm—whether it is a factory employing certain amount of employees and whether it came under the mischief—required a clarification from the Regional Provident Fund Commissioner . . . therefore, from a commercial point of view, for a commercial man, in the reality of the situation, to claim deduction in the year under question, was not unjustified. If, on that basis, the facts of which are on the records of the Tribunal, the Tribunal has allowed the deduction, we cannot say that the said decision of the Tribunal is perverse or incorrect. “

” . . . We would, however, say that it is not in all cases correct to say that a statutory liability discharged in a particular year becomes eligible for deduction in the year in question in the mercantile system of accounting. It depends on the facts and circumstances of the case and on the statutory provisions. Here in part the statutory liability admittedly accrued in the year in question and in part became real and enforceable in view of the facts in the year in question though referable to earlier years. But the reality of the situation was that, in substance, the liability accrued in the year in question. In that view of the matter, the decision of the Tribunal is sustained. ” (g) Addl. CIT vs. Rattan Chand Kapoor (1984) 43 CTR (Del) 283 : (1984) 149 ITR 1 (Del). In this case, the assessee, an individual, and its predecessor-in-interest, a firm, had entered into transactions of sale during the accounting years 1953-54 to 1958-59 and became exigible to sales tax. Some doubt was raised as to whether sales tax was payable by the assessee or not and, ultimately, the sales tax authorities issued a notice of demand on the assessee on February 25, 1964, for an amount which covered the sales tax liability of the firm for the periods 1953 to 1956 and the liability of the assessee from 1956-57 to 1958-59. The assessee claimed deduction of the said amount of demand in the asst. yr. 1964-65. It was found as a fact that the assessee did not follow the mercantile system of accounting strictly in respect of its sales tax liabilities which were reflected in the accounts of the assessee always on the basis of demand and to that extent the assessee had adopted a hybrid system of accounting.

On a reference, the Delhi High Court considered the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra), and held that the principles laid down in the said decision would be limited to a case where the demand was raised by the sales tax authorities before the income-tax assessment for the relevant period had actually been completed. No revised return could be filed by the assessee in the relevant assessment year where the assessment had already been completed and it would be open to the assessee to contend that the liability had accrued only when the demand was raised and not earlier. It was held that the assessee was entitled to claim deduction of sales tax demand in the asst. yr. 1964-65. (h) Shalimar Chemical Works Private Ltd. vs. CIT (1987) 65 CTR (Cal) 218 : (1987) 167 ITR 13 (Cal). In this case, by Act No. 44 of 1966, the definition of an “employee” in s. 2(9) of the Employees’ State Insurance Act, 1948, was amended and further classes of employees were brought within the purview of the said Act. The said amended section was challenged before the High Courts by a number of employees.

The assessee in that case came within the mischief of the amended s. 2(9) of the said Act and became liable to contribute for such insurance on and from January 1968. The assessee, however, did not make any contribution thereunder nor did it initiate any proceedings on its own challenging the said amended section.

After the decisions of several High Courts were rendered, the State insurance authorities issued a letter to the assessee in January, 1974, apprising the latter of the said decision and called upon the assessee to make such contribution from the wages of its employees with a warning that on failure, the assessee would be liable to make such contribution from its own funds. The demand was reiterated by the State insurance authorities in February 1974. The assessee was assessed to income-tax for the asst. yr. 1975-76, the accounting year ending June 30, 1974, and in its return claimed deduction of the contribution made to the Employees’ State Insurance Corporation for the period from January 1968, to June, 1973. The claim of the assessee was rejected by the ITO and the AAC. The assessee, however, succeeded before the Tribunal. On a reference, it was held by a Division Bench of the Calcutta High Court, following its earlier decision in Orient Supply Syndicate’s case (supra), that the statutory liability no doubt was created by the statute promulgated in 1966, but in the facts, the said liability became real and enforceable in the relevant subsequent year, though the demand related to earlier years. It was held further that from a commercial point of view, the assessee was entitled to treat the demand of the Employees’ State Insurance authorities in 1974, as final and enforceable and proceeded on the basis that the liability accrued on the said demand at that stage. It was noted by the High Court that the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra), had been less strictly applied by several High Courts. (i) Kalinga Tubes Ltd. vs. CIT (1987) 63 CTR (Ori) 117 : (1988) 169 ITR 374 (Ori). In this case, the assessee maintained its accounts on mercantile basis. For transactions made in the asst. yr. 1962-63, the assessee became liable to pay sales tax. The STO completed the assessment on March 31, 1966, and raised a demand of over Rs. 11 lakhs against the assessee. The assessee contested the assessment and ultimately, by an order made on May 28, 1970, the Sales Tax Tribunal reduced the demand to Rs. 2,22,161. The assessee claimed deduction of this amount as a business expenditure in the asst. yr. 1971-72. This was disallowed by the ITO, whose order was upheld by the Tribunal. On a reference, a Division Bench of the Orissa High Court held that though the assessee maintained its accounts on mercantile basis, it was entitled to claim deduction of its liability towards sales tax in the year when such liability was finally determined by the Sales Tax Tribunal. The Orissa High Court noticed the decision of the Assam High Court in Nathmal Tolaram’s case (supra),and of the Kerala High Court in L. J. Patel and Co.’s case (supra), and held that both the decisions were correct in their respective facts.

It is not disputed by the assessee in the instant case that it became liable to pay sales tax during the period 1968-69. It is also established clearly that the assessee followed the mercantile system of accounting and as such it became entitled to claim deduction of its liability towards sales tax in the relevant accounting period. In fact, it must have claimed the same deduction in the relevant earlier accounting year on account of sales tax, inasmuch as subsequently in the asst. yr. 1971-72 it did not claim deduction of the entire amount of sales tax as later assessed. As laid down by the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra), an assessee who follows the mercantile system of accounting is entitled to claim deduction from its profits and gains of its liability for sales tax during the relevant period irrespective of the fact whether the assessee had challenged the sales tax assessment in further proceedings or had failed to debit such liability in its books of account during the relevant period, or to make any provision therefor. The Supreme Court held further that the liability for payment of sales tax was independent of the assessment and the enforcement thereof and the absence of quantification would not stand in the way of accrual of the liability. The said decision of the Supreme Court has been construed and applied as aforesaid by the Kerala High Court in L. J. Patel & Co.’s case (supra) and K. A. Karim & Sons’ case (supra) by the Madras High Court in V. Krishnan’s case (supra).

A contrary view has been taken by the Assam High Court in Nathmal Tolaram’s case (supra), which held that the assessment of sales tax made in a particular assessment year became an enforceable liability in the nature of real expenditure in that year and the assessee would be entitled to claim deduction of the amount of sales tax as quantified by the assessment order in the assessment year when such quantification was made. The Kerala High Court as also the Madras High Court in their decisions as noted aforesaid have expressly differed from the view taken in Nathmal Tolaram’s case (supra). The Calcutta High Court in Orient Supply Syndicate’s case (supra), has also differed from the view taken in Nathmal Tolaram’s (supra) .

In Rattan Chand Kapoor’s case (supra), it was found as a fact by the Delhi High Court that the assessee did not follow the mercantile system of accounting strictly in respect of its sales tax liability and provided for the same in its accounts always on the basis of sales tax demand and as such the system of accounting adopted by the assessee in that case was a hybrid system. In the facts as aforesaid, it was not necessary for the Delhi High Court to analyse the principles laid down by the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra) and to lay down that where an assessment of income-tax had already been completed prior to the demand raised by the sales tax authorities, it would be open to the assessee to contend that the liability on account of such demand had accrued only when the demand was raised and not earlier.

In Kalinga Tubes Ltd.’s case (supra), the Orissa High Court held that an assessee was entitled to claim deduction of its liability towards sales tax in the year when such liability was finally determined by the Sales Tax Tribunal. The Orissa High Court did not consider the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.’s case (supra), at all. However, the decision of the Assam High Court in Nathmal Tolaram’s case (supra) and of the Kerala High Court in L. J. Patel and Co.’s case (supra), were both noted and it was held by the Orissa High Court that both the decisions were correct in their respective facts. No particular reasons have been recorded in the said judgment of the Orissa High Court in support of the views expressed and as such it is not possible to hold that any new principle has been laid down by the Orissa High Court.

The decisions of the Calcutta High Court in Orient Supply Syndicate’s case (supra) and Shalimar Chemical Works P. Ltd.’s case (supra), have to be construed in the context of their peculiar facts. It was not laid down by the Calcutta High Court that a statutory liability would not accrue in the year when the statute came into operation. These decisions were given on the basis that in both the cases the statutory liability sought to be imposed on the assessee was disputed altogether and such disputes were later decided by the authorities concerned. Only when such final decision was given and a demand was raised on the assessee, the assessee, as a commercial entity, came to be aware of the reality of the situation and it was held that in substance the liability accrued in the later year.

As already noted, in the instant case, the assessee was, at the material time, liable to pay sales tax and there was no question of such liability being disputed by the assessee which required to be finally decided. All that followed was a quantification of such liability by an order of assessment. In that view, the decisions of the Calcutta High Court in the aforesaid cases are of no assistance to the assessee in the instant case. With respect, I am unable to agree with the views expressed by the Assam High Court in Nathmal Tolaram’s case (supra) and the Orissa High Court in Kalinga Tubes Ltd.’s case (supra). I am in respectful agreement with the views expressed by the Kerala, Madras and Calcutta High Courts. The Tribunal, in my view, erred in following and applying the said decision of the Assam High Court in Nathmal Tolaram’s case (supra).

For the reasons as aforesaid, I am unable to accept the contention of the assessee and I answer the question referred in the negative and in favour of the Revenue. In the facts and circumstances of the case, there will be no order as to costs.

Let a copy of this judgment be sent under the seal of this Court and the signature of the Deputy Registrar to the Tribunal, Patna, under s. 260 of the IT Act, 1961.

BINOD KUMAR ROY, J.

I agree.

[Citation : 176 ITR 303]