1991 (8) TMI 130 - AT - Income Tax

Issues Involved:
1. Applicability of Section 43B of the IT Act on sales-tax collected but not paid.
2. Interpretation of Sections 28 and 29 of the IT Act in relation to Section 43B.
3. The treatment of sales-tax as a trading receipt.
4. Retrospective application of the proviso to Section 43B.

Issue-wise Detailed Analysis:

1. Applicability of Section 43B of the IT Act on sales-tax collected but not paid:
The core issue in both appeals is the addition of sales-tax collected but not paid under Section 43B of the IT Act, which the ITO treated as a trading receipt. The ITO relied on Supreme Court decisions in Chowringhee Sales Bureau Pvt. Ltd. vs. CIT and Sinclair Murray & Co. (P) Ltd. vs. CIT. The CIT(A) held that Section 43B, being a special provision, overrides the general provisions of Sections 28 and 29, and thus, the sales-tax collected but not paid should be treated as a trading receipt. However, the CIT(A) observed that sales-tax not due during the accounting year should not be treated as income. The Tribunal disagreed with the CIT(A), stating that the non obstante clause in Section 43B mandates that unpaid sales-tax, being a trading receipt, should be taxed, irrespective of whether it was due or not.

2. Interpretation of Sections 28 and 29 of the IT Act in relation to Section 43B:
The CIT(A) contended that Sections 28 and 29, which provide for the computation of profits and gains of business, do not mention Section 43B, and thus it should not apply. However, the Tribunal held that Section 43B, being a special provision, overrides the general provisions of Sections 28 and 29. The Tribunal emphasized the non obstante nature of Section 43B, which states that certain deductions are allowed only on actual payment, thus making it mandatory for the sales-tax collected but not paid to be taxed.

3. The treatment of sales-tax as a trading receipt:
The CIT(A) acknowledged that sales-tax collected is a trading receipt, in line with Supreme Court decisions in Chowringhee Sales Bureau Pvt. Ltd. vs. CIT and Sinclair Murray & Co. (P) Ltd. vs. CIT. However, the CIT(A) argued that sales-tax not due during the accounting year should not be treated as income. The Tribunal refuted this, stating that the sales-tax collected but not paid should be treated as a revenue receipt and taxed, as per the intention and provisions of Section 43B.

4. Retrospective application of the proviso to Section 43B:
The Tribunal held that the proviso to Section 43B, inserted w.e.f. 1st April 1988, cannot be applied retrospectively to the assessment years in question (1984-85 to 1987-88). The Tribunal cited Supreme Court decisions, emphasizing that no statute should be construed to have retrospective operation unless explicitly stated. The Tribunal concluded that the benefit of the proviso is not available to the assessee for the years under appeal.

Conclusion:
The Tribunal reversed the CIT(A)'s order, holding that the addition of sales-tax collected but not paid is taxable under Section 43B. The appeals of the Revenue were allowed, emphasizing that the unpaid sales-tax, being a trading receipt, should be taxed, and the proviso to Section 43B cannot be applied retrospectively.

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