ABAD FISHERIES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessee is an exporter of sea foods, mainly prawns. It follows the mercantile system of accounting. For the assessment year 1982-83, corresponding to the accounting year ending August 31, 1981, the assessee claimed deduction of an amount of Rs. 26,72,002/- as provision made for payment of tax under S.5A of the Kerala General Sales Tax Act, 1963 (the KGST Act) on the purchases of prawns exported by it. Though no assessment or demand had yet been made for the year concerned, the assessee apprehended such demand and therefore made provision for it, though it was disputing the liability on the ground that it was entitled to exemption in respect of the purchases by virtue of S.5(3) of the Central Sales Tax Act, 1956 (CST Act), the prawns exported being the same commodity as the prawns purchased, despite the intermediate process of cleaning and peeling performed on them. The assessing authority disallowed the claim for deduction of the provision on the ground that the assessee's apprehension of liability was "baseless", in the light of the decision of this court in Deputy Commissioner of Sales Tax v. Neroth Oil Mills Company Ltd., (1982) 49 STC 249. The Commissioner of Income Tax (Appeals) refused to interfere with the disallowance, relying on an added ground that the sales tax department had not made any demand on the assessee so far, and that if such demand were made at any time, the assessee could claim the deduction as and when the amount was paid. The Appellate Tribunal affirmed the view of the Commissioner on the grounds stated by him namely, that there could be no apprehension for the assessee, of any liability for purchase tax, in the light of the decision in Neroth Oil Mills, and that no demand had yet been made for the amount. The Tribunal also noted that the Supreme Court had subsequently in Sterling Foods v. State of Karnataka (1986) 63 STC 239, held that by the cleaning, deveining and peeling, prawns, do not cease to be prawns or become another distinct commodity disentitling the exporter of such goods from claiming the benefit of S.5(3) of the CST Act over the purchase effected by him.

(2.) This was the main item of dispute between the parties before the Tribunal. But there were two other points as well, one raised by the assessee that it was entitled to deduction of a sum of Rs.27,595/- being the amount paid towards sales tax during the year, and the other, raised by the revenue, whether the subsidy received by the assessee from the Central Government could be deducted to arrive at the cost of the machinery in computing the depreciation. The first of these points was found against the assessee on the ground that the payment did not relate to the relevant accounting year and the other, against the Revenue, having regard to the decision of this court in Commissioner of Income Tax v. Relish Foods, (1989) 180 ITR 454.

(3.) At the instance of the parties, the following questions were raised for the opinion of this court:-