COMMISSIONER OF INCOME TAX Vs. ST GEORGE MOTORS

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Cochin Bench has referred the following question for decision of this Court under S.256(1) of the Income Tax Act.

(2.) The Assessee is a firm carrying on business of passenger transport. The firm was constituted as per a deed of partnership dated 1-11-1959. Clause.11 of the partnership-deed provides for the accounts of the firm to be maintained on mercantile basis and its accounts are maintained accordingly.

(3.) The firm filed a return for the assessment year 1975-76 disclosing an income of Rs. 77,930.00. It had claimed deduction of Rs. 33,672.00 being the tax paid under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act 1963. The Income Tax Officer noticed that out of Rs. 33,672.00 paid during the accounting period a sum of Rs. 17, 091.72 related to tax payable during the earlier years. Accordingly the income assessable to tax was determined, without permitting deduction of the amount of tax under the T.P.G. Act relating to earlier years paid during the previous year. In appeal at the instance of the assessee, the Appellate Assistant Commissioner allowed deduction of the entire tax paid during the accounting period even though part of the payment related to tax accrued during earlier years. The decision of the Appellate Assistant Commissioner is confirmed by the Income Tax Appellate Tribunal based on its earlier decision in I.T.G.No.35 (Coch)/75-76 dated 29-12-1979. The Appellate Tribunal in its order observed that even though the liability for payment of tax under the T P.G. Act bad accrued during earlier years the liability was not in force during the pendency of the proceedings before this. Court and the Supreme Court, challenging the validity of the Act and after the pronouncement of the Supreme Court upholding its validity, the State Government had agreed to receive payment of the arrears of tax under the Act, in instalments. The sum of Rs 17,091.72 paid during the accounting period relates to the instalment that had fallen due with respect to the arrears of tax accrued during earlier years.