The Commissioner of Income Tax III, V. Srinivas Poultry and Cattle Feeds Pvt. Limited,

ITTA/83/2007

AI Insights

The case involves an appeal by the Commissioner of Income Tax-III, Hyderabad against Srinivasa Poultry & Cattle Feeds Pvt. Ltd., concerning the taxability of a sales tax refund under the Income-tax Act, 1961 for the assessment year 1996-97. The primary legal question was whether the sales tax refund, although credited to the assessee's profit and loss account, should be considered taxable income. The Tribunal had previously ruled in favor of the assessee, stating that the refund was not taxable as the legal proceedings challenging the sales tax demand were still pending. The High Court, led by Chief Justice Sri Kalyan Jyoti Sengupta, agreed with the Tribunal's decision, emphasizing that the refund was a return of the assessee's own money, which was not a taxable benefit under Section 41(1) of the Act.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 718991 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 06-02-2014
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: B SARMA
• Keywords: Mercantile system of accounting; Sales Tax Refund; Taxable income; Depreciation on poultry sheds
• Section: 5; 41(1); 80.JJ

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.83 OF 2007 DATED: 06-02-2014 Between: The Commissioner of Income Tax-III Hyderabad … Appellant And Srinivasa Poultry & Cattle Feeds Pvt. Ltd., Hyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.83 OF 2007 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal was admitted by the order dated 01-03-2007 without formulating the substantial question of law to decide the appeal. We think the appeal should not have been admitted. Any way, as the appeal has been admitted, we are bound to hear it. 2. The appeal is directed against the judgment and order of the learned Tribunal dated 10-02-2004 in relation to the assessment year 1996-97. This appeal was sought to be agitated on the following grounds/questions of law: “(1). Whether the finding of the ITAT that the sales tax refund though credited by the Assessee in its Profit and loss Account but claimed as not taxable in favour of the Assessee, is sustainable in terms of Sec.41(1) r/w. Sec.5 of the I.T. Act on the sole ground that the W.P. filed by the sale tax department challenging the STAT order is pending before this Hon’ble Court ? (2). Whether the finding of the Tribunal upholding the deduction claimed by the Assessee for analysis charges is sustainable in law u/s.80.JJ of I.T. Act ? (3). Whether the finding of the Tribunal allowing the depreciation on poultry sheds and other items covered by para. 11 of its order are sustainable in law ? (4). The other grounds would be urged at the time of arguments.” 3. Sri B. Narasimha Sarma, learned counsel appearing for the appellant, has argued on the first question only and did not argue on any of the remaining questions. So decision is taken by us thereon. 4. On the first question, Sri Sarma, learned counsel, says that the Tribunal should have held that the refund of tax amount paid earlier should be treated as an income as it has been shown in the books of accounts. The assessee, without any dispute, is maintaining mercantile system of accounting. Therefore, it should have been taxed under Section 41(1) of the Income-tax Act, 1961 (for brevity, ‘the Act’). 5. We are unable to accept his contention as all receipts of money are not income. The nature of the receipt has to be understood. The tax which was realised by the sales tax authority earlier was held to be illegal. As such, the same was returned. The money which was illegally collected from the assessee has only been returned to the assessee, meaning thereby, the assessee has not received any amount from an outsider. It was the receipt of his own money. In order to make this sort of receipt of money taxable under Section 41(1) of the Act, one of the preconditions, which is relevant here, is that it must be some benefit to the assessee. On the factual score, it has been said that benefit has not been derived by the assessee. Hence, it is not an income within the meaning of Section 41(1) of the Act. The learned Tribunal, in our view, has held correctly and it does not call for any interference by this Court. 6. The appeal is accordingly dismissed. No costs. ______________________ K.J. SENGUPTA, CJ _____________________ SANJAY KUMAR, J 06-02-2014 Svv "