1993 (6) TMI 249 - HC - Income Tax

Summary

Issues:
1. Applicability of section 43B of the Income-tax Act, 1961 on sales-tax liability treatment.
2. Deletion of addition of Rs. 77,439 under section 43B.
3. Justification of allowing deduction of Rs. 1,23,704 on account of sales-tax.

Issue 1:
The High Court of Calcutta considered the applicability of section 43B of the Income-tax Act, 1961 on the treatment of sales-tax liability. The assessee maintained a separate ledger account for sales-tax, crediting sales-tax collection and debiting sales-tax payment separately. The Court held that section 43B did not apply in this case as the sales-tax was not debited to the profit and loss account but was reflected as a liability in the balance sheet. The Court ruled that the Assessing Officer cannot include sales-tax in the sales turnover under section 43B.

Issue 2:
Regarding the deletion of the addition of Rs. 77,439 under section 43B, the Court noted that the Tribunal found the sales-tax account maintained by the assessee to be in compliance with the law. Since the sales-tax collection was credited to a separate account and payments were debited accordingly, the Court upheld the deletion of the addition made by the Income Tax Officer.

Issue 3:
The Court examined the justification for allowing a deduction of Rs. 1,23,704 on account of sales-tax. The Commissioner (Appeals) directed the Assessing Officer to allow this deduction, considering the excess sales-tax collected over the amount paid during the year. The Court agreed with the Tribunal's decision that the excess payment should be considered in the context of the current collection and payment, without including the opening unpaid collection. The matter was remanded to the Tribunal for further clarification based on the principles established.

In conclusion, the High Court of Calcutta ruled in favor of the assessee on the applicability of section 43B, deletion of the addition under section 43B, and the justification for allowing the deduction on account of sales-tax. The Court emphasized the importance of proper accounting treatment in determining the tax liabilities and deductions in accordance with the Income-tax Act, 1961.