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Issues Involved:
1. Deletion of addition under Section 43B on account of deferred sales tax liability. 2. Set-off of brought forward losses under Section 115JA. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 43B on Account of Deferred Sales Tax Liability: The primary issue in both appeals was the deletion of additions made under Section 43B of the Income-tax Act, 1961, on account of deferred sales tax liability. The facts of the case reveal that the assessee claimed the sales tax payable was converted into a loan by the State Government. The Assessing Officer (AO) did not accept this claim and added the sales tax liability to the income under Section 43B, as it remained unpaid. The assessee, in appeal, presented a letter from the General Manager, District Industries Centre, Gurgaon, confirming the grant of an interest-free loan for deferred payment of sales tax for the relevant financial years. The CIT(A) found merit in the assessee's submission, referencing CBDT Circular No. 674 dated 29-12-1993, and allowed the appeal. The revenue, aggrieved by this decision, argued that the conversion of sales tax liability into a loan did not occur during the financial year or before the due date for filing the return. They cited the Supreme Court decision in Chaurangi Sales Bureau, asserting that liabilities paid outside the profit & loss account fall under Section 43B. The assessee countered with the Exemption Certificate dated 28-3-1995, proving the deferral of sales tax by converting it into a loan for the period covering the assessment years in question. Upon review, the Tribunal found that the sales tax liability had indeed been converted into an interest-free loan by the State Government, amounting to payment of the liability. Thus, the AO was not justified in making the addition under Section 43B. The Tribunal also addressed the revenue's argument regarding the non-crediting of sales tax amounts in the profit & loss account, concluding that under Section 28, only the income embedded in receipts is taxable, not the receipts themselves. Therefore, the CIT(A)'s order was upheld, and the revenue's grounds of appeal were rejected. 2. Set-off of Brought Forward Losses under Section 115JA: In the assessment year 1998-99, the issue was whether the CIT(A) was correct in directing the AO to set off brought forward losses only to the extent of the difference between assessed income and 30% of the book profit under Section 115JA, i.e., Rs. 44,85,131. The assessee had brought forward business losses and argued that the balance sum brought to tax under the MAT provisions should be allowed to be carried forward for adjustment in subsequent years. The CIT(A) allowed the appeal, referencing the Calcutta High Court decision in CIT v. Singh Alloys and Steels Ltd., which supported the carry-forward of losses despite the MAT provisions. The revenue supported the AO's decision, while the assessee justified the CIT(A)'s order. The Tribunal examined whether the CIT(A) was right in holding that brought forward losses, unabsorbed depreciation, etc., should be adjusted as if assessed under regular provisions, not MAT. The Tribunal noted the Supreme Court's decision in Karnataka Small Scale Industries Development Corporation Ltd. v. CIT, which clarified that Section 115J involves two stages: computation of income under the Act and application of 30% of book profit if the computed income is less. The Supreme Court emphasized that deductions are considered in determining assessable income, and only unabsorbed losses and depreciation, which could otherwise be carried forward, are preserved under Section 115J(2). Applying this reasoning to Section 115JA, which is similar to Section 115J, the Tribunal reversed the CIT(A)'s order and restored the AO's decision. Consequently, the revenue's appeal on this ground was allowed. Conclusion: The appeal for the assessment year 1996-97 was dismissed, while the appeal for the assessment year 1998-99 was partly allowed. The Tribunal upheld the deletion of additions under Section 43B but reversed the CIT(A)'s decision regarding the set-off of brought forward losses under Section 115JA.
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