1986 (4) TMI 337 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 46(5A) of the Indian Income-tax Act and section 17(1) of the Andhra Pradesh General Sales Tax Act, 1957 in the context of a notice served by the Sales Tax Department on a bank branch office regarding a due amount from an assessee.

Analysis:
The judgment delivered by the High Court of Andhra Pradesh involved a case where a notice was served by the Commercial Tax Officer on a bank branch office regarding a due amount from an assessee to the Sales Tax Department. The bank promptly paid the initial amount in deposit to the department, but later allowed the assessee to encash a demand draft, leading to a claim by the Sales Tax Department for the same amount. The bank argued that there was no violation of the department's order and cited the case of Income-tax Officer v. Budha Pictures [1967] 65 ITR 620 (SC); AIR 1967 SC 1547 to support its position.

The court referred to the interpretation of section 46(5A) of the Indian Income-tax Act in the Budha Pictures case, which outlined four sets of circumstances where the section applies, including when money is due from a person to the assessee, when money may become due to the assessee, when a person holds money for an assessee, and when a person may hold money on account of the assessee. The court emphasized the importance of a subsisting relationship between the parties for the section to be applicable, rather than speculative considerations.

Drawing parallels between section 46(5A) of the Income-tax Act and section 17(1) of the Andhra Pradesh General Sales Tax Act, the court concluded that the principles laid down in the Budha Pictures case were directly applicable to the facts of the present case. The court held that the bank had not violated the terms of the department's order by allowing the encashment of the demand draft, as there was no breach of the order based on the existing relationship between the parties.

Ultimately, the court allowed the writ petition filed by the bank, stating that no costs were to be incurred. The court rejected the oral request for leave to the Supreme Court, as it found no substantial question of law of general importance arising from the case. The judgment highlighted the application of the Budha Pictures case's ratio to the facts of the instant case, leading to the decision in favor of the bank.