1987 (7) TMI 143 - AT - Income Tax

Business Expenditure Business Deduction or Loss Remission Or Cessation Of Trading Liability Deduction Of Tax At Source

Summary

Issues:
1. Allowability of premium as revenue deduction on redemption of debentures.
2. Treatment of loss from trade mark and goodwill agreement.
3. Tax treatment of amount received as refund of Excise Duty.
4. Credit of tax deducted at source not credited to Central Govt.

Analysis:

*Issue 1: Allowability of premium as revenue deduction on redemption of debentures*
The assessee claimed Rs. 12,50,000 as a revenue deduction for the premium payable on redemption of debentures. The tax authorities disallowed the claim, stating it was not an accrued liability of the year. The Tribunal held that the premium should be allowed as a revenue reduction over the period of debentures, allowing 1/7th of it in the instant year. The decision was based on the nature of the premium as an inducement and cost of borrowing, following the principles of issue of bonds at a discount.

*Issue 2: Treatment of loss from trade mark and goodwill agreement*
The assessee suffered a loss from an agreement involving the assignment of a trade mark and goodwill, along with an agreement to collect outstanding debts. The Tribunal upheld the decision that the loss was in the capital field, not a trading loss or bad debt. The loss was considered part of the agreement to take over the trade mark and goodwill, which were capital assets, not liabilities of the predecessor.

*Issue 3: Tax treatment of amount received as refund of Excise Duty*
The assessee received Rs. 67 lakhs as a refund of Excise Duty based on court orders. The tax authorities treated it as income, but the Tribunal held that since the amount was received on an interim basis pending court decisions, it should not be considered as income. The Tribunal referred to a Supreme Court judgment to support this decision, emphasizing that the amount was subject to refund based on the ongoing legal proceedings.

*Issue 4: Credit of tax deducted at source not credited to Central Govt.*
The Tribunal addressed the question of whether the assessee was entitled to credit for tax deducted at source but not credited to the Central Government. Referring to relevant sections and judicial pronouncements, the Tribunal held that the assessee was entitled to the credit of the tax paid, even if not credited to the Government. The Tribunal emphasized that the person deducting tax at source acts as a statutory agent of the Government, and the assessee should not suffer due to the deductor's default.

In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the assessee on the issues of premium deduction, treatment of the refund of Excise Duty, and credit for tax deducted at source. The Tribunal's decisions were based on legal principles, interpretations of relevant provisions, and precedents cited during the proceedings.