2002 (4) TMI 40 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sales tax collected by the assessee as a tea broker constitutes its income and is disallowable u/s 43B of the Income-tax Act, 1961.
2. Whether the Tribunal was justified in confirming the charging of interest u/s 216 of the Income-tax Act, 1961.

Summary:

Issue 1: Sales Tax Collection and Disallowance u/s 43B
- The assessee, a tea broker, collected sales tax under the West Bengal Sales Tax Act but did not pay it by the end of the accounting year. The amount was disallowed and added back u/s 43B of the Income-tax Act.
- The assessee argued that it was neither a purchaser nor a seller of tea, and the sales tax collected did not represent its trading receipts. Therefore, the disallowance u/s 43B was improper.
- The Tribunal upheld the disallowance, relying on the Supreme Court decision in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542, which treated sales tax collected as a trading receipt.
- The High Court, however, distinguished the present case from Chowringhee Sales Bureau P. Ltd., noting that the assessee did not claim the sales tax as a deduction and the sales tax was collected on behalf of the actual owner of the tea.
- The High Court referred to CIT v. Devatha Chandraiah and Sons [1985] 154 ITR 893 and CIT v. D. Shankaraiah [2001] 247 ITR 798, which supported the view that sales tax collected by an agent or broker does not constitute trading receipts.
- The Court concluded that the sales tax collected by the assessee could not be treated as a trading or business receipt and thus was not disallowable u/s 43B.

Issue 2: Charging of Interest u/s 216
- The assessee filed an estimate of advance tax which was later revised. The Income-tax Officer levied interest u/s 216 for underestimating the advance tax in the first two installments.
- The Tribunal upheld the levy of interest, stating that the assessee should have foreseen the higher profits towards the end of the accounting year.
- Dr. Pal, representing the assessee, conceded that this question should be answered in favor of the Department.
- Consequently, the High Court answered the second question in favor of the Department and against the assessee.

Conclusion:
- The first question was answered in favor of the assessee, holding that the sales tax collected by the assessee as a tea broker cannot be treated as a trading receipt and is not disallowable u/s 43B.
- The second question was answered in favor of the Department, upholding the levy of interest u/s 216.