COMMISSIONER OF INCOME TAX Vs. NATHMAL TOLARAM

JUDGEMENT

(1.) THE following question of law is referred to us under Section 66(1) of the Indian Income-tax Act, 1922, at the instance of the Commissioner of Income-tax :

(2.) THE statement of case relates to the assessment year 1958-59, the relevant accounting year being 2014 R.N. It is admitted that the assessee maintains the mercantile system of accounting.

(3.) IT is not disputed that the expenditure, being the sales tax demand, is wholly and exclusively for the purpose of the assessee's business. IT is clear that the assessee maintains the mercantile system of accounting. IT is also clear that the sales tax demand is for the periods ending on March 31, 1949, September 30, 1949 and March 31, 1950. For some reason or other, the assessee did not make any provision for payment of this tax during the relevant years pertaining to the aforesaid periods in question. IT is to be observed that the department also for one reason or another did not make any demand for the tax due earlier than the year 1957-58. IT is clear that once an enforceable demand has been made by the department and the assessee debited his account with the particular liability notified by the department, it becomes an expenditure under the mercantile system of accounting and the assessee can rightly claim the sum for deduction under Section 10(2)(xv).