9911796707
|
Home
Issues Involved:
1. Disallowance of sales tax outstanding by applying provisions of section 43B. 2. Charging of interest under section 139(8) for assessment year 1985-86. 3. Disallowance of land revenue of Rs. 16,236 for assessment year 1985-86. 4. Disallowance of debit balance of Rs. 6,708 for assessment year 1985-86. Issue-wise Detailed Analysis: 1. Disallowance of Sales Tax Outstanding by Applying Provisions of Section 43B: The primary issue is the disallowance of sales tax outstanding by invoking section 43B. The assessee argued that it acted as a distributor/commission agent and did not claim the sales tax as a deduction. The ITO, referencing the Supreme Court decision in *Chowringhee Sales Bureau (P.) Ltd. v. CIT*, treated the sales tax collected as part of the assessee's trading receipts, thus adding Rs. 2,40,251 for the assessment year 1984-85. The CIT(A) upheld this addition by relying on several cases, including *George Oakes (P.) Ltd. v. State of Madras* and *Kedarnath Jute Mfg. Co. Ltd. v. CIT*. For the assessment year 1985-86, the Commissioner directed the ITO to disallow Rs. 3,74,801 under section 263. The assessee contended that as a commission agent, no disallowance should be made as the sales tax collected was not claimed as a business expenditure. The Tribunal's decision in *ITO v. Thakersi Babubhai & Co.* and the Andhra Pradesh High Court decision in *CIT v. Devatha Chandraiah & Sons* supported this view. The assessee also argued that the outstanding payment was made before the prescribed date for filing the return under section 139(1), invoking the first proviso to section 43B, which was claimed to be retrospective. The D.R. countered that since the sales tax was not intimated to the sales tax authority in the principal's name, the liability was on the assessee. The D.R. also argued that the first proviso to section 43B was prospective, not retrospective, relying on the Delhi High Court decision in *Sanghi Motors v. Union of India*. Upon review, the Tribunal found that the assessee, as a distributor/commission agent, sold goods on behalf of the principal, and the property in the goods remained with the principal until sold. Therefore, the sales tax collected did not form part of the assessee's trading receipts. The Tribunal concluded that the sales tax collected was not the assessee's trading receipt but that of the principal, referencing the Andhra Pradesh High Court decision in *Devatha Chandraiah & Sons* and the Tribunal's decision in *J. Maheshkumar Petro Chemicals (P.) Ltd. v. Dy. CIT*. Consequently, no disallowance under section 43B was warranted. 2. Charging of Interest under Section 139(8) for Assessment Year 1985-86: The second issue regarding the charging of interest under section 139(8) was deemed consequential and required no further discussion. 3. Disallowance of Land Revenue of Rs. 16,236 for Assessment Year 1985-86: The assessee disputed the disallowance of Rs. 16,236 as land revenue, contending that the notice of demand was received on 21-5-1984, falling within the relevant assessment year. The Tribunal agreed, directing the ITO to allow the deduction, supported by the Supreme Court decision in *Kedarnath Jute Mfg. Co. Ltd. v. CIT*. 4. Disallowance of Debit Balance of Rs. 6,708 for Assessment Year 1985-86: The final issue involved the disallowance of a debit balance of Rs. 6,708, representing the difference between expenditure and income from earlier years. The Tribunal upheld the CIT's decision to disallow this amount, as it pertained to earlier years and the assessee followed the mercantile system of accounting. Conclusion: Both appeals were partly allowed, with the Tribunal ruling in favor of the assessee on the disallowance of sales tax and land revenue while upholding the disallowance of the debit balance.
|
