Kelvinator of India Ltd. vs Commissioner of Income Tax

Arijit Pasayat, C.J.—Heard.

Accepting a prayer for reference made u/s 256(1) of the income tax Act, 1961 (''the Act'') at the instance of assessee, the following question has been referred by the Tribunal, Delhi Bench ''C'', for opinion of this Court :

Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the sales tax liability amounting to Rs. 1,08,554 for the assessment year 1964-65 was not deductible as a business expense ?

We do not think it necessary to go into the factual aspects in detail as we find that while preparing statement of the case the Tribunal has, inter alia, observed as follows :

Against the order of the Appellate Assistant Commissioner of income tax the department went into an appeal before the Tribunal. The Tribunal have held that as the Supreme Court has passed an order and has given a clear finding that the assessee was not liable to any sales tax liability on such transfer of goods. Therefore, such order will also be binding on the sales tax authority in respect of a past year, although the Tribunal has mentioned in para 7 of this order that the Sales tax Officer has passed an order on remand in respect of that year and has again held the assessee to be liable to pay the sales tax for that year. It has clearly been brought to the notice of the Tribunal that this order was served on the assessee only on 8th September, 1978. The Sales tax Officer has clearly distinguished the facts of the year under assessment from the facts of the previous assessment years which were before the Supreme Court and he has made the company liable to pay the sales-tax. The Tribunal have over-looked this important point. The liability on the assessee has continued from the date of receipt of the order of the assessing authority on 28-6-1972. This liability has arisen in the assessment year in question and the liability still continues even after the order has been passed on remand in June 1978. It is an accrued liability pertaining to this assessment year and should be allowed as a deduction.

The observations made in the statement of case are clearly contrary to what the Tribunal itself had observed while dealing with the appeal. In the appeal, the Tribunal has disallowed the claim but while preparing the statement of case, it has come to a conclusion which is to the contrary. In view of this position, we feel the best course would be to direct the Tribunal for a fresh adjudication of issue involved on merits. Ordered accordingly. We make it clear that we have not expressed any opinion on merits in view of the aforesaid confusing state of affairs.

The reference is, accordingly, disposed of.