Commissioner of Income Tax vs Ambujam Bus Transports

P.C. Balakrishna Menon, J.—The Income Tax Appellate Tribunal, Cochin Bench, has referred the following questions for the decision of this court u/s 256(1)(b) of the Income Tax Act:

"1. Whether, on the facts and in the circumstances of the case, Rs. 24,578, being the amount paid by the assessee during the year ending March 31, 1973, towards arrears of tax payable under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, 1963, relating to the years 1966-67 to 1968-69, is to be allowed as a deduction in computing the assessee''s income for the assessment year 1973-74 ?

Whether, on the facts and in the circumstances of the case, the liability to pay the aforesaid sum of Rs. 24,678 arose during the accounting year ending March 31, 1973, by reason of the understanding arrived at between the assessee, on the one hand, and the Kerala State Government, on the other ?"

The answer to these questions is covered by our decision in ITR No. 315 of 1980 ( Commissioner of Income Tax Vs. St. George Motors, ) and should, therefore, be answered in favour of the Revenue.

Counsel for the assessee sought to make a distinction on the ground that the liability for payment of tax under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act arose when the assessee firm took over the assets and liabilities in the transport business that was being conducted by one Balasubramaniam who was inducted as a partner of the firm with effect from April 1, 1970. The liability for payment of tax under the Taxation of Passengers Act was that of Balasubramaniam who was inducted as a partner of the firm in 1970. Merely for the reason that the assets taken over took in also the liabilities charged on these assets, it cannot be said that the discharge of such liabilities will be a permissible deduction during the relevant accounting period. Therefore, we answer the questions referred in the negative, that is, in favour of the Revenue and against the assessee.

A copy of this judgment under the seal of the court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.