Commissioner of Income-tax Vs. Dalmia Dairy Industries Ltd. - Court Judgment

B. N. Kirpal, J.

1. The petitioner seeks reference of the following two questions to this court :

'1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the accrued sales tax liability of Rs. 4,84,040 is in allowable deduction during the year under consideration

2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in allowing the assessed's contention that the interest on the fixed deposits should be taxed on maturity basis and not on accrual basis ?'

2. As regards question No. 2, vide order dated August 30, 1990, passed in ITC No. 74 of 1988 - CIT v. Dalmia Dairy Industries Ltd. : [1991]188ITR611(Delhi) , we have already declined to call for any reference.

3. As regards question, the assessment year in question is 1979-80. In respect of the assessment year 1978-79, it is contended by learned counsel for the petitioner that the Tribunal itself, vide order dated July 27, 1987, had made a reference to this court under section 256 of the Income-tax Act. Ordinarily, that would be a sufficient reason, for us to allow this application and call for references on the first question but. In the present case, there are other facts which exist which have to be taken note of.

4. The question involved is with regard to the deduction of the sale tax claimed as a liability by the respondent. It appears that, by a notification in force in 1973, sales tax was sought to be levied by the State of West Bengal on skimmed milk powder. This notification was challenged by filing a writ petition in the Calcutta High Court. The Calcutta High Court admitted the writ petition and stayed the recovery of the sales tax. The respondent nevertheless continued to make entries in the books of account regarding the sales tax payable on sale of skimmed milk powder as a liability. Deduction was claimed which was initially disallowed but subsequently allowed by the Tribunal. It appears that, right, from the assessment year 1974-75, the deduction was allowed by the Tribunal and, in respect of three years, namely, 1974-75, 1975-76 and 1977-78, not only the Tribunal dismissed the application under section 256(1), but this court also dismissed two of the income-tax references being ITC No. 120 of 1985 and ITC No. 49 of 1987, the latter ITC being dismissed on July 29, 1987.

5. It is pertinent to note that, despite the dismissal of these income-tax references by this court, the Tribunal on July 27, 1988, made a reference under ITA No. 2907 of 1982 in respect of the assessment year 1978-79. In this order, the Tribunal has not referred to its earlier order passed under section 256(1) nor has it referred to the order passed by this court under section 256(2) of the Act.

6. It appears that the decision not to call for a reference was by reason of the fact that the controversy in question really stood concluded by reason of the judgment of the Supreme Court in the case of Kedarnath Jute Mfg. for deduction on account of sales-tax, which was payable, though it had been challenged in appeal. The Supreme Court held that, despite the challenge made, the liability and deduction should be allowed even though an appeal may be pending and a challenge made to the assessment in question.

7. In the present case, notwithstanding the pendency of the writ Petitioners the operation of the notification has not been stayed and, thereforee, the assessed was liable to pay the tax and deduction was allowable in view of the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. : [1971]82ITR363(SC) .

8. For the foregoing reasons, this petition is dismissed.

9. There will be no order as to costs.

10. Petition dismissed.