2012 (8) TMI 203 - AT - Income Tax

Remission of deferred sales tax liability - whether chargeable to tax as business income or is exempt - Miss. application filled by the Revenue against order - Held that - On comparison of the question noted by the Revenue and framed and answered by the Special Bench of the Tribunal, it is found that there is a mistake in the wordings of the question mentioned by the Revenue inasmuch as the highlighted portion of the question... against the future value of ₹ 3,37,13,393/- mentioned by the Revenue does not exist in the question framed by the Special Bench of the Tribunal. To invoke the provisions of section 41(1) the first requirement is as to whether in the assessment of the assessee, an allowance or deduction has been made in respect of loss, expenditure or the trading liability incurred by the assessee whereas in the present case of assessee he has obtained the benefit of deduction of sales tax liability u/s. 43B as per CBDT Circular No. 496 dated 25.9.1987 which clearly stated that ...the statutory liability shall be treated to have been discharged for the purposes of Section 43 B (emphasis supplied). Thus, the benefit of deduction was allowed for the purpose of section 43 B only and not under any other provisions of the Act. There is no dispute that the Assessing Officer has also applied the aforesaid Board Circular while giving the benefit of deduction u/s. 43 B, thus it is settled law that the circulars are binding on the department - as the first requirement of section 41(1) has not been fulfilled in the facts of the present case deferred sales tax liability will not be chargeable to tax as business income of the assessee - no mistake in the order of the Tribunal under the provisions of section 254(2). As the assessee itself has used the expression remission of the loan liability. However, the position in law is well settled that making of an entry or absence of an entry cannot determine rights and liabilities of parties - no material to show that the finding given by the Tribunal are contrary to the settled position of law - in favour of assessee.

Issues Involved:
1. Framing of the Question by the Special Bench.
2. Consideration of Arguments by the Department Representative (DR).
3. Factual Accuracy of Findings.
4. Application of Section 63 of the Indian Contract Act, 1872.
5. Use of the Term 'Remission' by the Assessee.
6. Non-Consideration of Decisions Cited by the DR.

Issue-wise Detailed Analysis:

1. Framing of the Question by the Special Bench:
The main issue raised by the Revenue was that the Special Bench of the Tribunal framed a new question that was not referred by the President of the Tribunal. The original question was whether the remission of deferred sales tax liability is chargeable to tax as business income u/s 41(1) or exempt as a capital receipt. The Special Bench rephrased it to include the exact amount in dispute and its breakdown. The Tribunal held that reframing the question was within the parameters of the original reference and necessary to bring out the issue more clearly. The Tribunal cited various judgments, including *National Thermal Power Co. Ltd. vs. CIT* and *Steel Authority of India Ltd. vs. CIT*, to support its stance that reframing the question was permissible to clarify the point requiring determination.

2. Consideration of Arguments by the Department Representative (DR):
The Revenue argued that the Tribunal failed to consider certain arguments made by the DR, particularly in paragraphs 75, 76, 77, 104, 105, and 107 of the order. The Tribunal found that the arguments of the DR were considered and incorporated in the order. Specifically, in para 75, the Tribunal started with the submission of the DR and discussed the definitions and equations related to Net Present Value (NPV). The Tribunal concluded that there was no apparent mistake in considering the DR's arguments.

3. Factual Accuracy of Findings:
The Revenue contended that the Tribunal's findings in paragraphs 76 and 105 were factually incorrect. The Tribunal had stated that the sales tax collected was treated as a loan liability by the State Government. The Tribunal clarified that its findings were based on the entries in the assessee's books, the provisions of the BST Act, 1959, and certificates issued by SICOM. The Tribunal held that there was no material to show any difference in the loan amount or the provisions of the BST Act, 1959, and thus, no mistake was apparent from the record.

4. Application of Section 63 of the Indian Contract Act, 1872:
The Revenue objected to the Tribunal's discussion of Section 63 of the Indian Contract Act, 1872, which was not a subject matter of discussion. The Tribunal explained that it examined the issue from another angle to determine whether the provisions of Section 41(1)(a) were applicable. This examination was within the scope of the question before the Special Bench, and thus, there was no mistake.

5. Use of the Term 'Remission' by the Assessee:
The Revenue argued that the assessee used the term 'remission' in its notes to accounts, but the Tribunal held there was no evidence of remission or cessation of liability by the State Government. The Tribunal stated that making an entry or absence of an entry cannot determine rights and liabilities of parties, citing the *Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT* case. The Tribunal found no mistake in its findings.

6. Non-Consideration of Decisions Cited by the DR:
The Revenue claimed that the Tribunal did not consider the decision in *Southern Technologies Limited vs. Jt. CIT*. The Tribunal noted that this decision was cited and acknowledged in its order. However, the facts and issues in the present case were different, making the cited decision distinguishable and not applicable. The Tribunal also referred to other decisions, including *Honda Siel Power Products Ltd. vs. CIT* and *CIT vs. Ramesh Electric and Trading Co.*, to support its stance that there was no apparent mistake in its order.

Conclusion:
The Tribunal concluded that there was no mistake apparent from the record in its order dated 10-11-2010. The issues raised by the Revenue were found to be outside the scope of Section 254(2) of the Income Tax Act, 1961. The Tribunal dismissed the Miscellaneous Application filed by the Revenue, stating that the order did not suffer from any apparent mistakes and did not warrant rectification.

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