KERALA ARECANUT COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessee, whose business is of a commission agent in arecanut, claims under S.10(2)(xv) of the Income Tax Act deduction of sums assessed payable as sales tax. Act XVIII of 19155 had become operative on October 1955, and had amended the General Sales Tax Act, XI of 1125. Thereafter a single point levy of six pies in the rupee had become chargeable under S.3(1) on the purchase turnovers of the last dealers in the Kerala State. The assessee was collecting till October 1, 1955, the tax on sales made by him in addition to his commission of 6 1/4 per cent, but thereafter he raised the commission to 7 1/2 per cent. On November 24, 1955, the Sales Tax Department made provisional assessment on the assessee for the last purchases he had made on behalf of the non resident arecanut dealers, which assessment was finally revised on September 15, 1955

(2.) It is clear that under S.18 of the General Sales Tax Act, the agent of a non resident purchaser incurs the liability of being assessed to the tax irrespective of the business of the nonresident, and the amount of the turnover being less than minimum. It is further clear that the agent has under S.18(iii) of the Act the rights of retaining the tax amount out of the principal's money with the agent. As the provision is important we would quote it.

(3.) We think the assessee's claim in this reference is not justified, because this right of the agent to compensation for the expenses has not been taken into consideration. In this connection tt would be remembered that the reason for permitting deductions on account of liabilities that have accused is that without taking them into account a fair appraisement of the assessee's profits for the account year would he impossible, and because of this principle the House of Lords has in Southern. Rly. of Peru Ltd. v. Owen, 1957 A.C. 334 held that the claim, for deduction of liability that may be contingent can be allowed.