COMMISSIONER OF INCOME TAX Vs. KRISHNA PHARMACEUTICALS LIMITED

JUDGEMENT

(1.) FOR the assessment year 1984-85, the respondent herein claimed that an amount of Rs. 50,770 shall be deleted from the taxable income on the ground that the liability to pay tax under the A. P. General Sales Tax Act and the Central Sales Tax Act became due during the relevant accounting year. The Income-tax Officer rejected that claim. However, on appeal, the Commissioner of Income-tax (Appeals) accepted the claim made on behalf of the assessee. Aggrieved by that order, the Department preferred a second appeal to the Income-tax Appellate Tribunal. The Tribunal dismissed the appeal holding that (1) "the assessee had not claimed any deduction towards sales tax liability from its profits. In other words, the sales tax collections and payments have been kept in a separate account. No part of the sales tax payment had been charged against the profit and loss account; and (2) though the sales tax collections are viewed as trading receipts, as the assessee is following the mercantile system of accounting, a corresponding liability to pay the tax into the coffers of the Government arises the moment sales are made". The Department sought reference of the following question :

(2.) THE Tribunal refused to refer that question in view of the decision of this court in Srikakollu Subba Rao and Co. v. Union of India . Hence, this petition is filed under section 256(2) of the Income-tax Act.

(3.) THE income-tax case is, accordingly, allowed. No costs.