- (1.) THE main business of the assessee-concern consists of purchase of paddy, husking it and selling the rice. Ninety-five per cent. of rice had to be sold to the Government under the Punjab Rice Procurement (Levy) Order at specified rates.
(2.) FOR the assessment years 1975-76 and 1976-77, the liability for payment of purchase tax accrued during the relevant accounting periods as the assessee was following the mercantile system of accounting. The asses-see challenged the levy of purchase tax in C. W. P. No. 564 of 1975. That writ was dismissed on March 8, 1976, and the application for extension of time for depositing the purchase tax was dismissed on March 30, 1976. The High Court declined to grant the certificate of fitness for appeal to the Supreme Court, vide order dated April 15, 1976.
(3.) DURING the proceedings for the assessment year 1977-78, the assessee claimed deduction of the purchase tax payable for the assessment years 1975-76 and 1976-77 in view of the fact that it was actually paid in the accounting year relevant to the assessment year 1977-78. The Income-tax Officer did not allow the deduction of the purchase tax paid for the aforesaid years on the basis of the assessment orders passed by the sales tax authorities during the period relevant to the assessment year 1977-78, on the ground that when an assessee follows the mercantile system of accounting, the deduction has to be claimed on the accrual of liability and relied upon certain decisions.;