2015 (1) TMI 1276 - HC - Income Tax

Addition u/s 41(1) r.w.s. 43B - taxability of sales tax amount collected and not paid during the current assessment year - deferred tax liability - Held that - This court had an occasion to consider the said question of law in the assessee s case itself in CIT v. McDowell and Co. Ltd. 2014 (11) TMI 272 - KARNATAKA HIGH COURT in favour of assessee

Summary

Issues:
1. Interpretation of sales tax deferred loan incentive scheme.
2. Validity of reopening assessments.
3. Application of section 43B of the Act on sales tax amount collected but not paid.

Analysis:

Issue 1: Interpretation of sales tax deferred loan incentive scheme
The High Court considered the appeal filed by the Revenue against the Tribunal's decision regarding the treatment of the amount representing sales tax deferred under the sales tax deferred loan incentive scheme. The Tribunal had held that this amount should be deemed as paid and, therefore, not taxable. The Court referred to a previous case where a similar question was addressed, and it was ruled in favor of the assessee. As the assessee succeeded on the merits, the Court deemed the question of liability of sales tax as purely academic. The Tribunal had remanded the matter to the assessing authority for fresh consideration, excluding the point already decided in the present judgment.

Issue 2: Validity of reopening assessments
The substantial questions of law raised in the appeal included whether the reasons recorded for reopening assessments had a nexus and whether the assessee was given sufficient opportunity to establish their case. The Court found that since the assessee succeeded on the merits regarding the sales tax liability issue, the question of reopening assessments became academic. The Tribunal had remanded the matter for fresh adjudication, and the assessing authority was directed to consider it afresh, excluding the point already decided in the judgment.

Issue 3: Application of section 43B of the Act on sales tax amount collected but not paid
Another substantial question raised was whether a specific sum of sales tax collected but not paid during the current assessment year would be affected by section 43B of the Act. The Tribunal had held that this amount would not be hit by section 43B based on a Board circular and the Bombay Sales Tax Act. The Court did not provide a direct ruling on this issue in the judgment, as the decision on the sales tax liability made the question academic. The assessing authority was directed to reconsider the matter excluding the already decided point.

In conclusion, the High Court's judgment addressed various legal issues related to the interpretation of the sales tax deferred loan incentive scheme, the validity of reopening assessments, and the application of section 43B of the Act on sales tax amounts. The Court provided detailed analysis and directions for further consideration by the assessing authority, emphasizing the need for a fresh assessment excluding the points already decided in the judgment.