Itta/85/2004 Of M/S.sri Venkata Balaji Jute Mills (P) Ltd v. The Commissioner Of Income Tax-Ii

*THE HONOURABLE SRI JUSTICE L. NARASIMHA REDDYand *THE HON’BLE SRI JUSTICE CHALLAKODANDA 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 <Gist : >Head Note: ? Cases referred: THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYANDTHE HON’BLE SRI JUSTICE CHALLA KODANDA RAMI.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 isreferable to Section 43B of the Income Tax Act, 1961 (for short ‘theAct’). The appellant is an industry running jute mill. It was extendedthe benefit of the Sales Tax Deferment under the Sales Tax DefermentScheme (for short ‘the Scheme’) for a period of six years in or aboutthe financial year 1991-92. According to the Scheme, the appellant isextended the facility of paying the sales tax on the transactions at theend of sixth year. The corresponding amount is treated as interest freeloan. The appellant has been maintaining separate account in respectof sales tax and was showing the component thereof in the returnsfiled year after year. The exemption claimed for that amount wasdisallowed on the ground that Section 43B of the Act provides for suchdeduction only when the amount of sales tax is remitted to the StateExchequer and such a remittance did not take place in the instantcase. Aggrieved by the order passed by the Assessing Officer, theappellant carried the matter in appeal to the Commissioner of IncomeTax (Appeals), Visakhapatnam. The appeal was allowed. TheDepartment carried the matter in further appeal to the Income TaxAppellate Tribunal, Visakhapatnam, by filing I.T.A.No.531/Vizag/98. The appeal was allowed through order dated 04.09.2003. Hence, thisfurther appeal by the assessee under Section 260A of the Act. Heard Smt. K. Neeraja, learned counsel for the appellant and SriS.R.Ashok, learned counsel for the respondent. It is, no doubt, true that Section 43B of the Act prohibits thededuction of component of sales tax transactions of an assessee,unless it has been remitted to the State Exchequer. It is almostcommon that whenever an assessee receives any amount in the formof sales tax, it would be under obligation to remit it to the StateGovernment and on filing proof thereof, the deduction is allowed. The case on hand presents some typical features. Theappellant has been extended the benefit of Deferment of Sales Tax. The appellant is not exempted from paying the sales tax. The onlyfacility extended to it was that it can retain with it, the amountrepresenting the sales tax for a period of six years, but it would beunder obligation to remit the accumulated amount at the end of thesixth year without interest. For all practical purposes, the assessee insuch cases would be holding the amount. Neither it can be treated asincome nor does it become liable to be taxed in any other manner. Itrepresents an expenditure deemed to have been incurred. It is adifferent matter that if it emerges that the corresponding amount is notremitted at the end of the sixth year, it can, certainly, be treated asincome and not only tax can be levied, but also penalty and interestcan be imposed. The Assessing Officer in the instant case was impressed by thefact that similar claim for the Assessment Year 1991-92 was rejected. The fact, however, remains that at a subsequent stage, the Tribunalremitted the matter. On such remittance, the Commissioner himselfallowed the deduction that was not taken into account by the Tribunal. We, therefore, allow the appeal and set aside the order dated04.09.2003 passed by the Tribunal in I.T.A.No.531/Vizag/98. As aresult, the order passed by the Commissioner dated 03.08.1998 shallremain in force. There shall be no order as to costs. The miscellaneous petitions filed in this appeal shall also stand disposed of. Date: 10.12.2014va The Assessing Officer in the instant case was impressed by thefact that similar claim for the Assessment Year 1991-92 was rejected. The fact, however, remains that at a subsequent stage, the Tribunalremitted the matter. On such remittance, the Commissioner himselfallowed the deduction that was not taken into account by the Tribunal. We, therefore, allow the appeal and set aside the order dated04.09.2003 passed by the Tribunal in I.T.A.No.531/Vizag/98. As aresult, the order passed by the Commissioner dated 03.08.1998 shallremain in force. There shall be no order as to costs. The miscellaneous petitions filed in this appeal shall also stand disposed of. Date: 10.12.2014va L.R copy ___________________________L.NARASIMHA REDDY, J ____________________________CHALLA KODANDA RAM, J