Sales tax payments made by the assessee were not unreasonable and unnecessary having due regard to the requirements of the business and were consequently deductible under Rule 12 of Schedule 1 of the Excess Profits Act.

VISWANATHA SASTRY, J.

( 1 ) THE question referred for decision is as follows : "whether there are materials. for the Tribunal to hold that the aforesaid sales tax payments of Rs. 30,221/- were unreasonable and unnecessary having due regard to the requirements of the business and not consequently deductible under Rule 12 of Schedule 1 of the Excess Profits Act?" the assessee is a registered firm carrying on business in the manufacture and sale of groundnut oil. The groundnuts and kernels are bought and crushed into oil and the oil is then sold. The assessee was assessed to sales-tax on the purchase of groundnuts and kernel used for the manufacture of oil and also on the sales of oil. The assessee is entitled to a rebate of the sales tax paid on groundnuts and kernel purchased and used for the manufacture of oil on furnishing the necessary particulars to the assessing authority. The assessee adopted a system of paying sales-tax provisionally, calculated on the turnover of the previous accounting year and having the liability adjusted at the end of the accounting year on the basis of the actual turnover in the accounting year and after taking into account the rebate allowable on the value of groundnuts and kernel crushed into oil. The final adjustment after the end of the accounting year resulted either in the assessee s liability to pay tax in excess of the provisional payment or a right to a refund of the excess tax provisionally paid

( 2 ) FOR the official year ending 31-3-1945, there was a provisional demand of sales-tax and a payment of Rs. 47,276/ -. The final assessment to sales-tax for the year resulted in a refund of Rs. 27,239/-, to the assessee. Similarly, for the,official year ending 31-3-1946, there was a provisional demand and payment of Rs. 45,315/- as sa es-tax. The final assessment for that year resulted in a refund of Rs. 31. 936/ -. The refunds of Rs. 27,239/- and of Rs. 31,936/- were received on and shown in the books of the assessee under dates 18-4-1946 and 12-11-1946 respectively. The assessee maintained its books according to the Diwali year. Purchases and sales of goods on credit were duly accounted for in the books. In respect of sales-tax, the actual cash payments made less recoveries by way of refunds or rebates were claimed as an expense annually without regard to any outstanding liability or refunds due pending adjustment at the final assessment to sales-tax. This practice was consistently adopted by the assessee and accepted for the assessee s income-tax assessments throughout. The sum of Rs. 47,276/-paid in respect of the provisional demand for the year ending 31-3-1945 was allowed as an expense in full for the assessment of income-tax for the assessment year 1946-47. Till the chargeabk accounting period ended on 17-10-1944, the assessments to excess profits tax were also made on the same basis as income-tax. However, for the chargeable accounting period 18-10-1944 to 4-11-1945 the Excess Profits Tax officer allowed only Rs. 17,055/- instead of Rs. 47,276/- the provisional payment for saks-tax made by the assessee. The sum of Rs. 17,055/- allowed by the Excess Profits Tax Officer represented the actual liability for sales-tax apportioned on time basis, for the turnover of the chargeable accounting period in question on the basis of the final assessments whose figures are given supra. Proceeding on this basis, the Excess Profit s Tax Officer added rs. 30,221/- in the computation of profits for the purpose of excess profits tax for the chargeable accounting period 18-10-1944 to 4-11-1945, though for purposes of income-tax, the entire sum of Rs. 47,276/- paid as sales-tax on provisional assessments had been allowed as a deduction in favour of the assessee. The Excess Profits Tax Officer purported to apply the provisions of Rule 12 of Schedule I of the Excess Profits Tax Act and disallowed the claim of the assessee to Rs. 30,221/-paid for sales-tax under the provisional assessment, on the ground that th

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