SATISH CHANDRA,C.J. - (1.) THE assessee is a private limited company. It carries on business of manufacture and sale of paints. The assessment year in question is 1975-76, the accounting period ending on 31st Dec., 1974.
(2.) IT appears that the assessee-company took over on lease the business of manufacture of paints from M/s Paints & Colour Products under registered deed of lease dt. 5th April, 1972, on payment of Rs. 7,500 as lease rent. During the assessment proceedings, the assessee claimed deduction on account of sales tax payments which included an amount of Rs. 50,507. This amount was paid by the assessee on account of the liability of sales-tax for business done earlier by the lessor (of the assessee). The ITO disallowed this claim on the ground that it pertained to a period prior to the commencement of the lease. The assessee went up in appeal and succeeded. The AAC held that in view of s. 17 of the Bengal Finance (Sales-tax) Act, 1941, as well as the terms of the lease deed between the parties, the assessee was entitled to claim the deduction.
(3.) BEING aggrieved, the Revenue went up to the Tribunal in appeal. The Tribunal held that in view of the provisions of s. 17 of the Bengal Finance (Sales-tax) Act, 1941, and cl. 2(A)(iii) of the lease deed, the order of the AAC was not right. It also held that in view of cl. 7 of the said lease deed, the lessee had not accepted the past sales-tax liabilities of the lessor. On this view, the order of the ITO was restored.;