MESSRS S R V G PRESS CO KURNOOL Vs. COMMISSIONER OF EXCESS PROFITS TAX HYDERABAD AND ANDHRA HYDERABAD

JUDGEMENT

(1.) The question referred for decision is as follows:- "Whether there are materials for the Tribunal to hold that the aforesaid sales-tax payments of Rs. 30,211 were unreasonable and unnecessary having due regard to the requirements of the business and not consequently deductible under Rule 12 of Schedule I of the Excess Profits Tax Act ?

(2.) The assessee is a registered firm carrying on business in the manufacture and sale of groundnut oil. The groundnuts and kernels are bought and crushed into oil and the oil is then sold. The assessee was assessed to sales-tax on the purchase of groundnuts and kernel used for the manufacture of oil and also on the sales of oil. The assessee is entitled to a rebate of the sale-tax paid on groundnuts and kernel purchased and used for the manufacture of oil on furnishing the necessary particulars to the assessing authority. The assessee adopted a system of paying sales-tax provisionally calculated on the turnover of the previous accounting year and having the liability adjusted at the end of the accounting year on the basis of the actual turnover in the accounting year and after taking into account the rebate allowable on the value of groundnuts and kernel crushed into oil. The final adjustment after the end of the accounting year resulted either in the assessee's liability to pay tax in excess of the provisional payment or a right to a refund of the excess tax . provisionally paid.

(3.) For the official year ending 31st March, 1945, there was a provisional demand of sales-tax and a payment of Rs. 47,276. The final assessment to sales-tax for the year resulted in a refund of Rs. 27,239, to the assessee. Similarly, for the official year ending 31st March, 1946, there was a provisional demand and payment of Rs. 45,315 as sales-tax. The final assessment for that year resulted in refund of Rs.3i,936. The refunds of Rs.27,239 and of Rs.31,936 were received on and shown in the books of the assessee under dates 8th April, 1946 and 12th November, 1946 respectively. The assessee maintained its books according to the Dewali year. Purchases and sales of goods on credit were duly accounted for in the books. In respeci of sales-tax, the actual cash payments made less recoveries by way of refunds or rebates were claimed as an expense annually without regard to any outstanding liability or refunds due pending adjustment at the final assessment to sales-tax. This practice was consistently adopted by the assessee and accepted for the assessee's income-tax assessments throughout. The sum of Rs. 47,276 paid in respect of the provincial demand for the year ending 31st March, 1945, was allowed as an expense in full for the assessment of income-tax for the assessment year 1946-47. Till the chargeable accounting period ended 17th October, 1944, the assessments to excess profits tax were also made on the same basis as income-tax. However, for the chargeable accounting period 18th October, 1944 to 4th November, 1945, the Excess Profits Tax Officer allowed only Rs. 17,055 instead of Rs. 47,276 the provisional payment for sales-tax made by the assessee.