The Commissioner of Income Tax, Cochin V. Ishwardas Sons

ITA/198/2009

AI Insights

The case involves the Commissioner of Income Tax, Cochin, as the appellant, and M/S Ishwardas Sons, Bazar Road, Cochin, as the respondent. The core issue was whether the Income Tax Appellate Tribunal was justified in cancelling the assessment of Rs.25,27,734, which was a refund of turnover tax assessed by the department for the assessment year 1995-96. The turnover tax had been previously allowed as a deduction in the assessments for the years 1990-91, 1991-92, and 1992-93. The Tribunal had cancelled the assessment based on a decision in another party's case, which the High Court found to be an incorrect application of the law, as there was no evidence that the refund order had not become final or that the department had filed a further appeal.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 813153 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 08-01-2010
• Assessment Year: misc
• Other Referred Cases: I.T.A. No.232/2002
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P BALAKRISHNAN; MOHAN PULICKAL
• Assessee Lawyers: JOSE JOSEPH
• Keywords: Assessment; Deduction; Income assessable; Refund; Turnover Tax
• Section: 43B; 41(1)

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN FRIDAY, THE 8TH JANUARY 2010 / 18TH POUSHA 1931 ITA.No. 198 of 2009() --------------------- ITA.435/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: ----------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV. SRI.JOSE JOSEPH, SC FOR IT RESPONDENT(S): --------------- M/S ISHWARDAS SONS, BAZAR ROAD, COCHIN-2. ADV. SRI.P.BALAKRISHNAN (E) SRI.MOHAN PULICKAL THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 08/01/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.198 of 2009 .................................................................... Dated this the 8th day of January, 2010. JUDGMENT Ramachandran Nair, J. Heard Standing Counsel for the appellant-Revenue and Adv. Sri.P.Balakrishnan, appearing for the respondent-assessee. The question raised is whether the Tribunal was justified in cancelling assessment of Rs.25,27,734/- being the refund of turnover tax assessed by the department during the previous year relevant for the assessment year 1995-96. Standing Counsel submitted that turnover tax paid by the assessee was allowed as deduction in the assessments during the preceding assessment years 1990-91, 1991-92 and 1992-93 and therefore, when refund is received in the relevant assessment year 1995-96, it is income assessable under Section 41(1) of the Income Tax Act. Counsel appearing for the assessee on the other hand produced copy of judgment in I.T.A. No.232/2002 in assessee's own case whereunder this court held that the turnover tax recovered by the assessee and retained as a contingency deposit in their account is their 2 income assessable at their hands. Based on this judgment, the contention of the counsel for the assessee is that the very same income got assessed in the year in which it is recovered from the principals. We do not think the assessment of this income in the hands of the assessee stands in the way of assessment of refund of tax under Section 41(1). If in any subsequent assessment year after 1988-89 the assessee claimed deduction of turnover tax on payment basis under Section 43B and later got refund by virtue of exemption allowed in appeal, the amount is assessable under Section 41(1) in the year in which refund is received. From the orders of the Tribunal we find that the assessee has not disputed the deduction allowed to it on payment of turnover tax during the assessment years 1990-91, 1991-92 and 1992-93 as stated by the Assessing Officer. However, the Tribunal has proceeded to allow the appeal by holding that by virtue of decision of this court in another party's case, the refund order has not become final and so much so, it is not income of the assessee. We are unable to uphold this 3 reasoning of the Tribunal because assessee itself does not have a case that the department has filed a further appeal or claimed return of the refund amount even at the time the matter was heard by the Tribunal. Therefore, the reason stated by the Tribunal is absolutely untenable. We, therefore, allow the appeal by reversing the order of the Tribunal and restoring the assessment. However, if the assessee has not claimed deduction of the turnover tax on payment basis under Section 43B for 1990-91, 1991-92 and 1992-93 as stated in the order, then certainly there is no case for assessment of refund because if the amount happened to be assessed as it's income for any earlier year, repeated assessment is not called for on refund of the tax after payment by the respondent. In other words, if deduction of turnover tax paid was allowed in the assessment for any year prior to the year in which refund is issued, then the refund amount is assessable in the year in which it is received by virtue of operation of Section 41(1) of the Act. However, it will be open to the assessee to produce evidence that no deduction is 4 claimed for payment of turnover tax for the assessment years 1990-91, 1991-92 and 1992-93 as stated in the assessment order and if the same is found to be a mistake, the Assessing Officer will exclude the amount from assessment by rectifying the order. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms "