1985 (3) TMI 108 - AT - Income Tax

Accounting Year Assessment Year Deemed Income Municipal Corporation Tax Liability Terminal Tax Trading Liability Trading Receipt

Summary

Issues Involved:

1. Assessability of terminal tax in the assessment year 1973-74.
2. Remission of liability by the order of the Addl. Senior Sub-Judge, Delhi.
3. Applicability of section 41(1) of the Income-tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Assessability of Terminal Tax in the Assessment Year 1973-74:

The primary issue was whether the terminal tax of Rs. 56,910, collected in the assessment years 1969-70 and 1970-71, could be assessed as income in the assessment year 1973-74. The assessee contended that the terminal tax, being an integral part of the trading receipts, should have been assessed in the years it was collected (1969-70 and 1970-71) and not in 1973-74. The Tribunal, however, noted that the terminal tax was not accounted for as trading receipts by the assessee in those years, which effectively reduced the trading receipts. This reduction was seen as a deduction of the terminal tax liability. Consequently, when the liability ceased by the order dated 19-7-1971, the provisions of section 41(1) were justifiably invoked to assess the amount in the year 1973-74.

2. Remission of Liability by the Order of the Addl. Senior Sub-Judge, Delhi:

The second issue was whether the order of the Addl. Senior Sub-Judge, dated 19-7-1971, constituted a remission of liability. The Tribunal found that the order indeed resulted in the cessation of the terminal tax liability. The assessee's argument that there was no remission of liability was rejected. The Tribunal upheld the view that the liability ceased altogether when the court ruled that the terminal tax was not payable to the Municipal Corporation of Delhi (MCD).

3. Applicability of Section 41(1) of the Income-tax Act, 1961:

The third issue revolved around the applicability of section 41(1) in assessing the terminal tax collections in the year 1973-74. The assessee argued that since the liability was never allowed as a deduction in earlier years, section 41(1) could not be invoked. The Tribunal, however, concluded that the assessee had obtained the benefit of deduction by not including the terminal tax collections in its trading receipts. This amounted to claiming a deduction on account of terminal tax liability. When the liability ceased in 1973-74, it became assessable as deemed income under section 41(1). The Tribunal supported this conclusion with decisions from the Hon'ble Gujarat and Kerala High Courts.

Additional Arguments:

The assessee also relied on various Supreme Court decisions to argue that income assessable in one year cannot be assessed in another year and that the principle of res judicata does not apply to income-tax proceedings. The Tribunal acknowledged these principles but found them inapplicable to the present case. The Tribunal emphasized that the income by way of terminal tax accrued in the years 1969-70 and 1970-71 but was reduced by the corresponding liability. Therefore, the taxability under section 41(1) was justified when the liability ceased in 1973-74.

Conclusion:

The Tribunal dismissed the appeal, holding that the lower authorities were justified in invoking section 41(1) and assessing the remission of terminal tax liability amounting to Rs. 56,910 in the assessment year 1973-74. The various grounds and arguments raised by the assessee were found unacceptable.