Itr/44/1999 Of The Commissioner Of Income Tax v. Official Liquidator Of M/S Essab Computer Pvt. Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 44 of 1999 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Sd/- Sd/- ==================================== 1.Whether Reporters of Local Papers YESmay be allowed to see the judgment ?2.To be referred to the Reporter or not ?NO3.Whether their Lordships wish to see NOthe fair copy of the judgment ?4.Whether this case involves a NOsubstantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?5.Whether it is to be circulated to the NOcivil judge ?====================================THE COMMISSIONER OF INCOME TAX - ApplicantVersusOFFICIAL LIQUIDATOR OF M/S ESSAB COMPUTER PVT. LTD. - Respondent====================================Appearance :MRS MAUNA M. BHATT for Applicant.OFFICIAL LIQUIDATOR for Respondent. ==================================== CORAM : HONOURABLE MR.JUSTICE K.A.PUJandHONOURABLE MR.JUSTICE BANKIM.N.MEHTAandHONOURABLE MR.JUSTICE BANKIM.N.MEHTA Date : 11/08/2008ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE K.A.PUJ) 1. At the instance of the revenue, following question of law is referred to for the opinion of this Court for A.Y. 1987 – 88 & 1988 – 89.is referred to for the opinion of this Court for A.Y. 1987 – 88 & 1988 – 89. Whether the Appellate Tribunal is right in law and on facts in upholding the view taken by the CIT (A) deleting the addition made under Section 43B of the Act when the assessee failed to produce any supporting evidence ?and on facts in upholding the view taken by the CIT (A) deleting the addition made under Section 43B of the Act when the assessee failed to produce any supporting evidence ? 2. The brief facts of the case are that while framing the assessments, for A.Y. 1987 – 88 & 1988 – 89, the Assessing Officer found that the assessee collected sales tax but the same was not credited into the profit and loss account. The explanation of the assessee was that since the amount has not been credited in the profit and loss account, no deduction has been claimed. Accordingly, Section 43B has no application. Secondly, the amount collected was covered under the Scheme from the State Government whereby the sales tax payable would be converted into loan and it was applied for such conversion. The Assessing Officer was not satisfied with the explanation and further, the assessee could not submit any supporting evidence to show that the amount was converted into loan under the scheme of Government. The Assessing Officer has, therefore, invoked the provisions of Section 43B of the Income-tax Act, 1961 and made addition of the amounts of sales-tax collected by the assessee during the previous year relevant to the assessment years in question. conversion. The Assessing Officer was not satisfied with the explanation and further, the assessee could not submit any supporting evidence to show that the amount was converted into loan under the scheme of Government. The Assessing Officer has, therefore, invoked the provisions of Section 43B of the Income-tax Act, 1961 and made addition of the amounts of sales-tax collected by the assessee during the previous year relevant to the assessment years in question. 3. Being aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the CIT (Appeal). The CIT (Appeal) vide his order dated 28.12.1990 for A.Y. 1987 – 88 & 1988 – 89 allowed the claim of the assessee. Before the CIT (Appeal), a certificate dated 25.07.1989 issued by the State Government was produced, certifying that the sum of Rs.1,16,30,636/- collected by the assessee during the period from 01.10.1985 to 31.03.1989 has been deemed to be received as sales tax and converted into a loan. A copy of the agreement for financial assistance dated 13.03.1990 with G.I.I.C. Ltd. has also been filed in the assessee preferred appeal before the CIT (Appeal). The CIT (Appeal) vide his order dated 28.12.1990 for A.Y. 1987 – 88 & 1988 – 89 allowed the claim of the assessee. Before the CIT (Appeal), a certificate dated 25.07.1989 issued by the State Government was produced, certifying that the sum of Rs.1,16,30,636/- collected by the assessee during the period from 01.10.1985 to 31.03.1989 has been deemed to be received as sales tax and converted into a loan. A copy of the agreement for financial assistance dated 13.03.1990 with G.I.I.C. Ltd. has also been filed in support of the assessee's contention. It was contended before the CIT (Appeal) that these documents were not ready at the time of completion of the assessment and as such, they could not be filed before the Assessing Officer. After considering these documents, in light of the Circular No.496 dated 25.09.1987, the CIT (Appeal) deleted the addition made by the Assessing Officer under Section 43-B of the Act to the extent, the amount covered by the certificate and the agreement for deemed payment. before the CIT (Appeal) that these documents were not ready at the time of completion of the assessment and as such, they could not be filed before the Assessing Officer. After considering these documents, in light of the Circular No.496 dated 25.09.1987, the CIT (Appeal) deleted the addition made by the Assessing Officer under Section 43-B of the Act to the extent, the amount covered by the certificate and the agreement for deemed payment. 4. Being aggrieved by the said order, the revenue took up the matter before the Income-tax Appellate Tribunal, Ahmedabad and the Tribunal vide its order dated 12.03.1998 confirmed the order of the CIT (Appeal) on this point. The Tribunal has observed that before the CIT (Appeal), supporting evidence was produced and in view of the Certificate as well as the agreement, addition made by the Assessing Officer under Section 43B of the Act was rightly deleted by the CIT (Appeal).the matter before the Income-tax Appellate Tribunal, Ahmedabad and the Tribunal vide its order dated 12.03.1998 confirmed the order of the CIT (Appeal) on this point. The Tribunal has observed that before the CIT (Appeal), supporting evidence was produced and in view of the Certificate as well as the agreement, addition made by the Assessing Officer under Section 43B of the Act was rightly deleted by the CIT (Appeal). 5. In the above background of the matter, the above referred question of law is referred to this Court. referred question of law is referred to this Court. 6. During the pendency of the reference before this Court, the respondent Company has gone into liquidation and hence, the Official Liquidator is joined as a party on behalf of the respondent Company by an order dated 20.06.2008. the respondent Company has gone into liquidation and hence, the Official Liquidator is joined as a party on behalf of the respondent Company by an order dated 20.06.2008. 7. Heard Mrs. Mauna M. Bhatt, learned Standing Counsel appearing for the revenue. Nobody is present on behalf of the Official Liquidator. appearing for the revenue. Nobody is present on behalf of the Official Liquidator. 6. During the pendency of the reference before this Court, the respondent Company has gone into liquidation and hence, the Official Liquidator is joined as a party on behalf of the respondent Company by an order dated 20.06.2008. the respondent Company has gone into liquidation and hence, the Official Liquidator is joined as a party on behalf of the respondent Company by an order dated 20.06.2008. 7. Heard Mrs. Mauna M. Bhatt, learned Standing Counsel appearing for the revenue. Nobody is present on behalf of the Official Liquidator. appearing for the revenue. Nobody is present on behalf of the Official Liquidator. 8. The short question before the Court is as to whether the addition made by the Assessing Officer on account of sales-tax liability under Section 43-B of the Act has been justified in view of the fact that necessary evidence has been produced by the assessee before the CIT (Appeal). The CIT (Appeal) has verified the claim of the assessee and the documents produced before him. He has also forwarded the said document to the Assessing Officer for his verification. After his satisfaction about the documents produced before him, the CIT (Appeal) has allowed the claim of the assessee and deleted the additions made by the Assessing Officer under Section addition made by the Assessing Officer on account of sales-tax liability under Section 43-B of the Act has been justified in view of the fact that necessary evidence has been produced by the assessee before the CIT (Appeal). The CIT (Appeal) has verified the claim of the assessee and the documents produced before him. He has also forwarded the said document to the Assessing Officer for his verification. After his satisfaction about the documents produced before him, the CIT (Appeal) has allowed the claim of the assessee and deleted the additions made by the Assessing Officer under Section 43-B of the Income-tax Act, 1961. 9. This very issue has come up before this Court earlier in the case of Commissioner of Income-tax V/s. Shree the case of Commissioner of Income-tax V/s. Shree Talal Taluka Sahakari Khand Udyog Mandli Limited, (2003) 259 ITR 21 wherein this very Circular has been referred to and the Court held that in Circular No.496 dated 25.09.1987, the Board had made it clear that if the sales tax due to the Government is converted as a loan which may be repaid by the assessee subsequently by installments, the Department shall treat the sales tax dues as actually paid for all purposes. The Gujarat Government in that case passed a Resolution bearing No. INC/1087/143-1, dated 23.03.1988, and the said resolution was made operative from April 1, 1983. A combined reading of the circular as well as the resolution issued by the State Government would make it clear that the assessee is entitled to relief and the benefit given under Section 43-B of the Income-tax Act, 1961, can be claimed by the assessee. Similar is the position here. Both the appellate authorities, namely, CIT (Appeal) as well as the Tribunal have found that the Certificate produced by the assessee during the course of appellate proceedings before the CIT (Appeal) certified that the sales-tax amount collected by the assessee during the period from 1985 to 1990 was converted into loan and the said Certificate was examined in light of the Circular No.496 dated 25.09.1987. 10.Since the issue is squarely covered by the aforesaid decision of this Court, we answer the question referred to us in the affirmative i.e. in favour of the assessee and against the revenue. decision of this Court, we answer the question referred to us in the affirmative i.e. in favour of the assessee and against the revenue. 11.This reference is accordingly disposed of without any order as to costs. order as to costs. Sd/- Sd/-[K. A. PUJ, J.][B. N. MEHTA, J.] Savariya