COMMISSIONER OF INCOME TAX Vs. GLORIOUS SHOE FACTORY

JUDGEMENT

(1.) This is an application u/s 256(2) of the IT Act, 1961 which has been moved by the CIT, Agra.

(2.) THE facts, in brief, are these. The opposite party M/s. Glorious Shoe Factory, Shoe Market, Agra, (herein -after described as the assessee) is a partnership carrying on business in the purchase and sale of shoes mostly on commission basis. In the course of the assessment proceedings for the asst. yr. 1976 -77, the ITO found an account in the name and style of O.H.C.C. Account. It showed a credit balance of Rs. 35,540. The said amount represented the collection made by the assessee from its customers on account of Purchase Tax. This amount was added by the ITO to the assessees income for the detailed reasons given by him in the assessment order for the asst. yr. 1975 -76. The ITO relied on the decision of the Supreme Court in the case of Sinclaire Murray and Co. (P) Ltd. v. CIT, Calcutta (1974) 97 ITR 615 (SC). The ITO further observed that if the assessee paid this amount to the Government or to the other parties in the future the such payment would be allowed as a deduction in the year in which it would be made.

(3.) THE ld. counsel for the department contended that in the previous year relevant to the asst. yr. 1976 -77 there was no liability for the payment of purchase tax under U.P. Sales Tax Act and, therefore, the assessee could not claim a deduction of any amount on the ground of liability to pay purchase tax. It was therefore, pressed that the aforesaid questions of law did arise in the instant case.