M/S HAJI LAL MOHD. BIRI WORKS vs COMMISSIONER OF INCOME TAX, LUCKNOW II

The Supreme Court ruled that the payment of Sales Tax composition fee of Rs. 1,91,887/- was not an allowable expenditure for the assessment year 1968-69 under the Income Tax Act. Citing the precedent in Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income Tax (1971) 82 ITR 363, the Court held that since the assessee followed the mercantile system of accounting, the tax liability accrued in the earlier assessment year (1957-58) could not be claimed as a deduction in the subsequent year. The appeal was dismissed, affirming the High Court's decision against the assessee.