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Commissioner Of Income-Tax vs Poonam Chand Trilok Chand on 1 November, 1973 cites

Kedarnath Jute Manufacturing Co. Ltd. vs Commissioner Of Income-Tax (Central) on 24 August, 1966

It is enough if the liability for such expenditure accrues, The fact that the assessee did not pay this amount to the Government in the relevant accounting year did not alter the position. Similarly, the fact that the assessee did not make appropriate entries in its books of accounts but kept the amount in a reserve account, would also not alter the position. The entries in .the books of accounts are not in any way determinative of an item of income or expenditure. The contentions raised by the department in the instant case are similar to those raised before the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income-tax, [I971] 82 ITR 363 (SC). In that case also the assessee-company claimed deduction in the income-tax proceedings under the Income-tax Act of the sales-tax levied upon it. The Income-tax Officer rejected the assessee's claim for deduction on the ground that the assessee had contested the sales-tax liability in appeal and that it had made no provision in its books of accounts with regard to the payment of that amount. The Supreme Court held that the moment a dealer made either a purchase or sale, which was liable to sales-tax, the obligation to pay the sales-tax arose, and the assessee who followed the mercantile system of accounting was entitled to deduct from the profits and gains of its business the liability to sales-tax which arose on the sales made by it during the relevant previous year. It further observed that the liability did not cease to be a liability because the assessee had taken proceedings before the higher authorities for getting it reduced or wiped out and further the fact that the assessee had failed to debit the liability in its books of accounts also did not debar it from claiming the same as a deduction.
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