COMMISSIONER OF INCOME TAX Vs. NATHUABHAI DESABHAI

JUDGEMENT

(1.) PURSUANT to the direction of this court, the Income-tax Appellate Tribunal, Indore, has referred the following question for our opinion :

(2.) THE assessee is a registered firm deriving income from wholesale business in tobacco. THE assessment year in question is 1970-71, for which the accounting period ended on November 9, 1969. THE assessee had imported tobacco from outside the State of Madhya Pradesh and sold the same within the State between S.Y. 2007-8 to 2014-15, relevant to the A.Ys. 1952-53 to 1959-60. THE assessee had collected sales tax from its constituents on the sales of tobacco and paid the same to the State Govt. THE total amount so paid during these years was Rs. 76,578. Later, the assessee brought a suit against the State Govt. claiming refund of this amount on the ground that the recovery was illegal and unconstitutional. THE claim was decreed by the High Court of Madhya Pradesh during the previous year relevant to the assessment year 1970-71 and the State appeal against the judgment of the High Court was dismissed by the Supreme Court. In view of the judgment of the High Court, the assessee during the accounting period credited its sales tax reserve account by Rs. 76,578. THE ITO brought this amount to tax under Section 41(1) of the I.T. Act, 1961, the ITO observed :

(3.) WHEN the matter came before the Appellate Tribunal, the department reiterated its contention that the assessee had claimed and was allowed deduction of sales tax during the assessment years 1952-53. to 1958-59, and the AAC had erred in holding that, in fact, no such deduction was claimed and allowed during those years. The prayer on behalf of the department before the Appellate Tribunal was that: