Commissioner of Income Tax vs St. George Motors

K.S. Paripoornan, J.—At the instance of the Revenue, the follow-ing two questions of law have been referred by the Income Tax Appellate Tribunal for the decision of this court:

"1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of the tax, admittedly payable for previous years but not paid, in the accounting year in which it is paid ?

Whether, on the facts and in the circumstances of the case and in the absence of a finding that the Department had in the assessment of the assessee refused to allow the tax under the Taxation of Passengers and Goods Act, the Tribunal is right in law and fact in finding ''that this element of tax expenditure would not have gone into the computation of the estimate of income in the previous year'' and is not the above finding wrong, unreasonable and based on no materials and surmises ?"

The respondent-assessee is a transport operator. For the assessment year 1974-75, the assessee claimed deduction of Rs. 36,096, being the tax paid under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act. The said sum included a sum of Rs. 19,567 relating to the tax for the earlier years. The Income Tax Officer disallowed the claim in so far as it related to the tax for the earlier years amounting to Rs. 19,567. It was upheld by the Appellate Assistant Commissioner. But, in second appeal, the Appellate Tribunal held that the assessee''s claim should be allowed. Thereafter, the Revenue filed an application u/s 256(1) of the Income Tax Act for referring certain questions of law for the decision of this court. It was rejected. The Appellate Tribunal was directed by this court to refer the above two questions of law for the decision of this court and that is how this reference has come up before us for hearing.

We heard counsel for the Revenue. In ITR No. 100 of 1981 ( Commissioner of Income Tax Vs. Ambujam Bus Transports, ), a Division Bench of this court held that arrears of tax, under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, paid during an accounting year, but which related to the prior years, cannot be allowed to be deducted in computing the income of the assessee for the accounting year. In rendering the said decision, the Division Bench followed the earlier decision in ITR No. 315 of 1980 ( Commissioner of Income Tax Vs. St. George Motors, ). We have gone through the aforesaid two judgments of this court. In the light of the above two decisions of this court, we are satisfied that the plea of the Revenue should succeed. On that basis, we answer the first question in the negative, against the assessee and in favour of the Revenue.

In the light of our answer to question No. 1, no decision is called for on question No. 2.

A copy of this judgment under the seal of this court and the signature of the Registrar shall be sent to the Income Tax Appellate Tribunal.