PUNJAB FEED MILLS Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) THIS is a petition filed under articles 226 and 227 of the Constitution for quashing the assessment order dated March 27, 1979, the appellate order passed by the Appellate Assistant Commissioner on December 9, 1981, and the revisional order passed by the Commissioner of Income-tax on February 16, 1983.

(2.) THE petitioner in the status of a partnership-firm was carrying on the business of manufacturing poultry feed at village Jandiali in the district of Ludhiana. The petitioner made a provision for Rs. 20,000 in the books of account for the assessment year 1976-77 on account of purchase tax which was payable under the Punjab General Sales Tax Act, 1948. Though the question of levy of purchase tax was still under challenge, the provision as aforesaid was made in the books of account so as to meet the liability as and when it was finalised. The assessee's plea was that purchase tax liability relating to the assessment year 1974-75 was still to be quantified but, since the liability on account of purchase tax did accrue on the event of purchase, the assessee was entitled to claim deduction on account of the tax liability on accrual basis. The Assessing Officer, however, did not accept the plea and disallowed the deduction claimed at Rs. 20,000.

(3.) SHRI Ramesh Kumar, learned counsel for the assessee, has argued that additional demand of purchase tax had been created by the Assessing Officer for the assessment year 1974-75, vide assessment order dated May 4, 1977. An appeal was filed against the said assessment order but the demand created at Rs. 40,514 was upheld, vide the appellate order dated November 7, 1979. Since the liability to pay tax had accrued in the year 1974-75 and was payable to the Government in the next year, it was for that reason that deduction has been claimed during the income-tax proceedings initially at Rs. 20,000 before the Income-tax Officer but subsequently at Rs. 40,514 before the Appellate Assistant Commissioner.