2006 (9) TMI 142 - HC - Income Tax

Applicability of of section 43B - Receipt of Excise duty - the amount of excise duty collected by the assessee but not paid under the provisions of section 43B ? - HELD THAT - In our opinion, the Tribunal was unjustified in observing that the provisions of section 43B of the Act would not be attracted, the Tribunal was also unjustified in observing that the excise duty recovered from the purchaser was kept with the assessee as deposit. If the assessee was of the opinion that under the circumstances, it was not required to recover any excise duty from any purchaser, then, it should not have recovered and should have felt content with a bank guarantee in its favour, but, once it proposes to recover the tax or the excise duty, then, the said recovery would amount to trade receipt in its hand and it would not be entitled to exemption u/s 43B of the Act if it does not actually pay the amount. The Tribunal was unjustified in law and on facts in holding that the trader was entitled to the benefits u/s 43B and not to be charged on the amount recovered under the head of excise duty. The reference is answered in favour of the Revenue. The order passed by the Tribunal is set aside. The reference stands allowed.

Summary

Issues:
1. Interpretation of section 43B of the Income-tax Act, 1961 regarding disallowance of excise duty collected but not paid.
2. Applicability of judgments in Chowringhee Sales Bureau P. Ltd. and Sinclair Murray and Co. P. Ltd. to the present case.

Analysis:

Issue 1: Interpretation of section 43B of the Income-tax Act, 1961
The case involved a dispute over the disallowance of Rs. 6,55,595 excise duty collected but not paid by the assessee under section 43B of the Income-tax Act. The Assessing Officer held that the excise duty collected was part of trading receipts and should be included in the assessee's income. The Commissioner of Income-tax (Appeals) and the Tribunal also confirmed this view. The Tribunal observed that the excise duty collected was a deposit by or on behalf of customers and that as there was a stay by the High Court, the provisions of section 43B would not apply. However, the Revenue argued that non-payment of excise duty should be treated as part of the income under section 43B.

Issue 2: Applicability of judgments in Chowringhee Sales Bureau P. Ltd. and Sinclair Murray and Co. P. Ltd.
The Revenue contended that the judgments in Chowringhee Sales Bureau P. Ltd. and Sinclair Murray and Co. P. Ltd. supported the inclusion of excise duty in the trading receipt of the assessee's income. These judgments emphasized that if the amount recovered, such as sales tax, is not paid to the concerned department, it should be treated as part of the sale price and included in the income. The Division Bench in Mugat Dyeing and Printing Mills clarified that the term "actually paid" in section 43B means the amount must be really paid to the Revenue. The court further emphasized that a liability to pay does not equate to actual payment.

In conclusion, the High Court held that the Tribunal was unjustified in its interpretation that the provisions of section 43B would not apply in this case. The court emphasized that the benefits of section 43B would only be available if the sum payable is actually paid by the assessee. Therefore, the Tribunal's decision was set aside, and the reference was answered in favor of the Revenue.