1993 (11) TMI 50 - HC - Income Tax

Summary

Issues Involved:
1. Power of appellate authority to grant stay of tax collection during the pendency of appeals.
2. Whether the amounts collected towards sales tax liability constitute income.
3. Disallowance of depreciation to the extent of the subsidy received from the Government.

Summary of Judgment:

1. Power of Appellate Authority to Grant Stay:
The petitioner, a partnership firm, filed writ petitions seeking mandamus to direct the third respondent to stay the collection of disputed tax and interest for assessment years 1987-88 to 1990-91. The petitioner contended that the third respondent, the appellate authority, is bound to stay the disputed demand during the pendency of the appeals, citing the Supreme Court decision in ITO v. M.K. Mohammed Kunhi [1969] 71 ITR 815. The court held that the appellate jurisdiction u/s 251 of the Act impliedly grants the power to stay proceedings, as it is necessary for the effective exercise of appellate powers. The court directed the third respondent to consider and pass orders on the stay applications filed by the petitioner.

2. Amounts Collected Towards Sales Tax Liability:
The petitioner argued that the amounts collected as contingency collections towards possible sales tax liability did not constitute income and were not part of trading receipts. These amounts were either payable to the State as sales tax or refundable to customers. The first respondent issued notices u/s 148 and revised the assessments, including these amounts as income. The petitioner challenged this addition in appeals before the Commissioner of Income-tax (Appeals).

3. Disallowance of Depreciation:
The petitioner also challenged the disallowance of depreciation to the extent of the subsidy received from the Government. The first respondent had added back the depreciation claim on the value of the plant and machinery subsidized by the Government.

Conclusion:
The court concluded that the appellate authority u/s 251 has the implied power to grant stay of tax collection during the pendency of appeals. It directed the third respondent to take up the stay applications and pass appropriate orders. The issues regarding the inclusion of sales tax collections as income and the disallowance of depreciation were to be addressed in the pending appeals.