1986 (7) TMI 130 - AT - Income Tax

Summary

Issues involved:
1. Disallowance of trading liability under section 43B of the Income-tax Act, 1961.
2. Taxability of excess sales tax collected.
3. Entertaining appeal against interest under section 215 of the Income-tax Act, 1961.

Disallowed Trading Liability under Section 43B:
The assessee, a firm engaged in commission agency and trading, contested the disallowance of Rs. 66,084 as trading liability under section 43B by the Income Tax Officer (ITO). The Commissioner (Appeals) ruled in favor of the assessee, noting that since the amount was not claimed as a trading liability in the profit and loss account, disallowance under section 43B was not justified. The Commissioner directed the ITO to recalculate the interest under section 215 after excluding the disallowed amount.

Taxability of Excess Sales Tax Collected:
The revenue contended that the excess sales tax collected by the assessee should be considered as income, even if not credited or debited to the profit and loss account. The department argued that the substance of the matter should be considered over the form, citing relevant Supreme Court decisions. The assessee, however, maintained that since the sales tax was not claimed as a deduction and was not debited in the profit and loss account, the provisions of section 43B were wrongly applied by the ITO. The assessee also highlighted provisions of the Gujarat Sales Tax Act to support its position.

Entertaining Appeal Against Interest under Section 215:
The department raised an issue regarding interest under section 215, which the assessee argued did not arise from the previous orders. The department's representative urged the Tribunal to reverse the Commissioner's decision, while the assessee's counsel strongly supported the Commissioner's order. The assessee emphasized the legislative intent behind section 43B and provided detailed arguments to support the Commissioner's decision.

Conclusion:
After considering the submissions and the legislative intent behind section 43B, the Tribunal dismissed the appeal by the revenue. The Tribunal found that the ITO misapplied section 43B as the assessee had not claimed deduction for sales tax collected on behalf of principals. The Tribunal upheld the Commissioner's decision, emphasizing that the assessee had complied with sales tax obligations and had not claimed deductions for the amount in question, thus rejecting the revenue's appeal.