2002 (7) TMI 51 - HC - Income Tax

Business Income - Deemed Profits - Remission Of Liability - Value Of Benefit Or Perquisite - Discontinunance Of Business Succession - Whether, the Appellate Tribunal is right in law and on facts in holding that the amount of sales tax refund received by the assessee-firm was not to be included in the total income of the assessee under the provisions of section 41(1) nor the provisions of sections 176(3A), 170(1)(b) and 28(iv) are attracted? - We, therefore, answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue.

Summary

Issues:
1. Inclusion of sales tax refund in the total income of the assessee under various provisions of the Income-tax Act.

Analysis:
The judgment addressed the issue of whether the sales tax refund received by the assessee-firm should be included in its total income under specific provisions of the Income-tax Act for the assessment years 1984-85 and 1985-86. The assessee received sales tax refunds in those years, which the Assessing Officer included in the total income of the assessee. However, the Commissioner of Income-tax (Appeals) and the Tribunal held that the amounts of sales tax refund should not be included in the income of the assessee under the provisions of section 41(1) of the Act, section 176(3A), section 170(1)(b), and section 28(iv). The Commissioner of Income-tax (Appeals) relied on previous decisions to support this stance.

The judgment discussed the applicability of section 41(1) in detail, citing Supreme Court decisions to establish that the identity of the assessee must remain the same for this provision to apply. As the identity of the assessee had changed in this case, with the refund received by the successor firm, section 41(1) was deemed inapplicable. Similarly, the judgment addressed the applicability of section 28(iv) by referring to a previous court decision, which clarified that if the benefit received is in monetary form, section 28(iv) does not apply. Since the refund received was in money, the provision was not applicable.

Furthermore, the judgment analyzed the applicability of section 176(3A), highlighting that this section is only relevant in cases of business discontinuance, which was not the scenario in this case. The judgment also delved into section 170(1)(b) along with its Explanation, emphasizing that the sales tax refund did not fall under the definition of "gain accruing from the transfer," as required by the provision. The judgment concluded that the sales tax refund should not be included in the total income of the assessee under any of the mentioned provisions.

In conclusion, the court ruled in favor of the assessee, stating that the sales tax refund should not be included in the total income, as per the provisions discussed. The judgment disposed of the reference with no order as to costs, affirming the decision in favor of the assessee.