Ita/198/2009 Of The Commissioner Of Income Tax v. M/S.ishwardas Sons

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. Thequestion raised is whether the Tribunal was justified in cancellingassessment of Rs.25,27,734/- being the refund of turnover tax assessedby the department during the previous year relevant for the assessmentyear 1995-96. Standing Counsel submitted that turnover tax paid bythe assessee was allowed as deduction in the assessments during thepreceding assessment years 1990-91, 1991-92 and 1992-93 andtherefore, when refund is received in the relevant assessment year1995-96, it is income assessable under Section 41(1) of the Income TaxAct. Counsel appearing for the assessee on the other hand producedcopy of judgment in I.T.A. No.232/2002 in assessee's own casewhereunder this court held that the turnover tax recovered by theassessee and retained as a contingency deposit in their account is their income assessable at their hands. Based on this judgment, thecontention of the counsel for the assessee is that the very same incomegot 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 theassessee stands in the way of assessment of refund of tax under Section41(1). If in any subsequent assessment year after 1988-89 the assesseeclaimed deduction of turnover tax on payment basis under Section 43Band later got refund by virtue of exemption allowed in appeal, theamount is assessable under Section 41(1) in the year in which refund isreceived. From the orders of the Tribunal we find that the assessee hasnot disputed the deduction allowed to it on payment of turnover taxduring the assessment years 1990-91, 1991-92 and 1992-93 as statedby the Assessing Officer. However, the Tribunal has proceeded toallow the appeal by holding that by virtue of decision of this court inanother party's case, the refund order has not become final and so muchso, it is not income of the assessee. We are unable to uphold this reasoning of the Tribunal because assessee itself does not have a casethat the department has filed a further appeal or claimed return of therefund 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 Tribunaland restoring the assessment. However, if the assessee has not claimeddeduction of the turnover tax on payment basis under Section 43B for1990-91, 1991-92 and 1992-93 as stated in the order, then certainlythere is no case for assessment of refund because if the amounthappened to be assessed as it's income for any earlier year, repeatedassessment is not called for on refund of the tax after payment by therespondent. In other words, if deduction of turnover tax paid wasallowed in the assessment for any year prior to the year in which refundis issued, then the refund amount is assessable in the year in which it isreceived 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 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 sameis found to be a mistake, the Assessing Officer will exclude the amountfrom assessment by rectifying the order. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge