2014 (1) TMI 1444 - AT - Income Tax

Taxability of amount waived by the sales tax department Held that - The deferred sales tax liability being the difference between the payment of net present value against the future liability credited by the assessee under the capital reserve account in its books of account was a capital receipt and could not be termed as remission/cessation of liability and consequently no benefit would arise to the assessee in terms of section 41(1)(a) - The decision in DY. COMMISSIONER OF INCOME TAX Versus M/s SULZER INDIA LTD 2012 (8) TMI 203 - ITAT MUMBAI followed. Disallowance on account of delay in remittance u/s 2(24)(x) r.w section 36(1)(va) of the Act - Employees contribution to PF Held that - The payments have been made within the grace period of five days which is permissible under the Provident Fund Act - The counsel drew out attention to the chart which is part of Form 3CD - the Assessing Officer himself had admitted that the assessee had deposited the employees contribution to provident fund account within the grace period - As the amount has been deposited within the permissible grace period there was no reason for the disallowance - the Assessing Officer directed to allow the claim of the assessee Decided in favour of Assessee.

Summary

Issues:
1. Taxability of amount waived by the sale tax department.
2. Disallowance on account of delay in remittance of employees' contribution to provident fund.

Analysis:

Issue 1: Taxability of amount waived by the sale tax department
The appellant appealed against the CIT(A) order regarding the taxability of Rs.49,81,640 waived by the sales tax department. The Assessing Officer believed it to be taxable under "business income." The CIT(A) upheld this view, considering it a trading receipt. The appellant argued that the sales tax liability was converted into a loan under the state government scheme and should not be taxed. The Tribunal analyzed the scheme, following the decision in the case of Sulzer India Ltd., where it was held that waiver of future liability at net present value does not constitute remission of liability. The Tribunal found no reason to interfere with the CIT(A)'s decision, ruling in favor of the appellant.

Issue 2: Disallowance on account of delay in remittance of employees' contribution to provident fund
The Assessing Officer disallowed Rs.1,41,324 for delay in depositing employees' provident fund contribution. The CIT(A) upheld this disallowance. However, the appellant argued that the payments were made within the permissible grace period of five days. The Tribunal reviewed the evidence and directed the Assessing Officer to allow the claim, as the amount was deposited within the grace period. Consequently, ground no. 2 was allowed, and the appeal was allowed in favor of the appellant.

In conclusion, the Tribunal dismissed the revenue's appeal regarding taxability of the waived amount by the sales tax department and allowed the appellant's appeal concerning the disallowance of provident fund contribution. The decision was based on a thorough analysis of the schemes involved and relevant legal precedents, ensuring a fair and just outcome for the appellant.