Sri Venkata Balaji Jute Mills (P) Ltd., Amadalavalasa V. The Commissioner of Income Tax - II, Visakhapatnam

ITTA/85/2004

AI Insights

The case revolves around the interpretation of Section 43B of the Income Tax Act, 1961, concerning the deductibility of sales tax deferred under a specific scheme. Sri Venkata Balaji Jute Mills (P) Ltd., the appellant, was granted a deferment of sales tax under the Sales Tax Deferment Scheme, allowing them to retain the sales tax collected for six years without interest. The primary legal issue was whether the deferred sales tax could be deducted from the taxable income of the appellant before it was actually remitted to the State Exchequer. The Assessing Officer initially disallowed the deduction, leading to an appeal by the appellant, which was later allowed by the Commissioner of Income Tax (Appeals). However, the Tribunal reversed this decision, prompting the current appeal.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 820251 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 10-12-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S R ASHOK
• Assessee Lawyers: K NEERAJA
• Keywords: Income Tax; Sales Tax; Sales Tax Deferment; Section 43B; Deferment Scheme
• Section: 43B

Judgement Text

"* THE HONOURABLE SRI JUSTICE L. NARASIMHA REDDY and * THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.No.85 of 2004 % 10.12.2014 # Sri Venkata Balaji Jute Mills (P) Ltd., Amadalavalasa. …. Appellant Vs. $ The Commissioner of Income Tax - II, Visakhapatnam …. Respondent ! Counsel for the Appellant: SMT. K. NEERAJA Counsel for Respondent: SRI S.R. ASHOK, SC FOR INCOME TAX Head Note: ? Cases referred: THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.85 of 2004 JUDGMENT: (per the Hon’ble Sri Justice L.Narasimha Reddy) The question that arises for consideration in this appeal is referable to Section 43B of the Income Tax Act, 1961 (for short ‘the Act’). The appellant is an industry running jute mill. It was extended the benefit of the Sales Tax Deferment under the Sales Tax Deferment Scheme (for short ‘the Scheme’) for a period of six years in or about the financial year 1991-92. According to the Scheme, the appellant is extended the facility of paying the sales tax on the transactions at the end of sixth year. The corresponding amount is treated as interest free loan. The appellant has been maintaining separate account in respect of sales tax and was showing the component thereof in the returns filed year after year. The exemption claimed for that amount was disallowed on the ground that Section 43B of the Act provides for such deduction only when the amount of sales tax is remitted to the State Exchequer and such a remittance did not take place in the instant case. Aggrieved by the order passed by the Assessing Officer, the appellant carried the matter in appeal to the Commissioner of Income Tax (Appeals), Visakhapatnam. The appeal was allowed. The Department carried the matter in further appeal to the Income Tax Appellate Tribunal, Visakhapatnam, by filing I.T.A.No.531/Vizag/98. The appeal was allowed through order dated 04.09.2003. Hence, this further appeal by the assessee under Section 260A of the Act. Heard Smt. K. Neeraja, learned counsel for the appellant and Sri S.R.Ashok, learned counsel for the respondent. It is, no doubt, true that Section 43B of the Act prohibits the deduction of component of sales tax transactions of an assessee, unless it has been remitted to the State Exchequer. It is almost common that whenever an assessee receives any amount in the form of sales tax, it would be under obligation to remit it to the State Government and on filing proof thereof, the deduction is allowed. The case on hand presents some typical features. The appellant has been extended the benefit of Deferment of Sales Tax. The appellant is not exempted from paying the sales tax. The only facility extended to it was that it can retain with it, the amount representing the sales tax for a period of six years, but it would be under obligation to remit the accumulated amount at the end of the sixth year without interest. For all practical purposes, the assessee in such cases would be holding the amount. Neither it can be treated as income nor does it become liable to be taxed in any other manner. It represents an expenditure deemed to have been incurred. It is a different matter that if it emerges that the corresponding amount is not remitted at the end of the sixth year, it can, certainly, be treated as income and not only tax can be levied, but also penalty and interest can be imposed. The Assessing Officer in the instant case was impressed by the fact that similar claim for the Assessment Year 1991-92 was rejected. The fact, however, remains that at a subsequent stage, the Tribunal remitted the matter. On such remittance, the Commissioner himself allowed the deduction that was not taken into account by the Tribunal. We, therefore, allow the appeal and set aside the order dated 04.09.2003 passed by the Tribunal in I.T.A.No.531/Vizag/98. As a result, the order passed by the Commissioner dated 03.08.1998 shall remain in force. There shall be no order as to costs. The miscellaneous petitions filed in this appeal shall also stand disposed of. ___________________________ L.NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J Date: 10.12.2014 va L.R copy "