1980 (1) TMI 109 - AT - Income Tax

Summary

Issues:
1. Disallowance of claim for interest on delayed payment of sales tax.
2. Validity of passing orders under section 154 of the IT Act on a debatable issue.
3. Nature of liability for delayed payment of sales tax and its admissibility as a deduction.

Detailed Analysis:
1. The appellant filed appeals against the disallowance of the claim for interest on delayed payment of sales tax by the AAC. The original assessments did not disallow the interest amounts debited to the accounts for the respective years. However, the ITO passed orders under section 154 disallowing the claim for interest.

2. The appellant objected before the AAC on the grounds of improper notices and the debatable nature of the issue regarding the admissibility of the claim for interest on delayed sales tax payment. The AAC held that the notices were proper and overruled the objection based on the merits, stating that the retention and utilization of government funds meant for payment was an infringement of law, and the amounts paid by the appellant were in the nature of penalties.

3. The appellant appealed to the Tribunal, citing conflicting decisions by different benches on the nature of the liability for delayed sales tax payment. The Tribunal noted that the Supreme Court's decision did not clearly indicate the nature of the liability and that two benches had taken opposite views. As per the Supreme Court's decision in a similar case, where two views are possible, the ITO could not have passed an order under section 154. Therefore, the Tribunal reversed the AAC's order and allowed the appeals, stating that the orders disallowing the claim for interest on delayed payment of sales tax required to be vacated.