Commissioner of Income Tax vs Akal Springs Pvt. Ltd.

In this petition u/s 256(2) of the Income Tax Act, 1961, the Revenue prays that the Tribunal should be directed to refer the following question for the consideration of this court :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the order of the Commissioner of Income Tax (Appeals) in allowing sales tax liability when no actual payment was made of sales tax collected by the assessee during the year itself ?"

On a perusal of the record of the case, we find that the assessing authority had made an addition of Rs. 1,68,130 to the declared income of the assessee on account of the unpaid sales tax liability. This was done in accordance with the decision of a learned single judge of this court in Sirsa Industries Vs. Commissioner of Income Tax and Another, . On appeal, the Commissioner reversed the order of the assessing authority and held that the addition was not justified as the decision in Sirsa Industries Vs. Commissioner of Income Tax and Another, had been reversed by the Division Bench. The decision of the Commissioner of Income Tax having been upheld by the Tribunal, the Revenue filed an application for a reference to this court. This application having been rejected, vide order dated March 2, 1994, the Revenue has approached this court through the present petition.

After hearing counsel for the parties, we find that the decision in Sirsa Industries Vs. Commissioner of Income Tax and Another, was reversed by a Division Bench of this court in Sirsa Industries Vs. Commissioner of Income Tax and Another, . Consequently, the question sought to be raised by the Revenue has already been clearly answered by a Division Bench of this court. In fact, there is a string of the decisions for the proposition that "wherever an assessee follows the mercantile system of accounting, deduction is claimable only in the year in which the liability accrues and not in the accounting year in which the liability is finalised or the amount is actually paid". We further find that a similar view was taken by the Kerala Full Bench in Commissioner of Income Tax Vs. K.A. Karim and Sons and Others, . Since the issue is authoritatively settled by the decisions of different High Courts, we find that it is not necessary to direct the Tribunal to make a reference of the abovesaid question for the consideration of this court. Accordingly, the application is dismissed.