1986 (9) TMI 137 - AT - Income Tax

Summary

Issues:
- Interpretation of Section 43B of the Income Tax Act regarding deductions for tax and duty payments.
- Distinction between tax, duty, and fees under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966.
- Allowability of provisions made for sales tax, market committee cess, and central sales tax as deductions.

Analysis:

The judgment by the Appellate Tribunal ITAT Hyderabad-B involved three appeals from business firms for the assessment year 1984-85, all related to common points. The firms, engaged in manufacturing and trading, had made provisions for payment of sales tax, market committee cess, and central sales tax. The CIT (A) had dismissed the appeals, upholding the disallowances made by the ITO under Section 43B of the Income Tax Act. The CIT (A) differentiated between tax and cess, justifying the disallowances. The Tribunal considered arguments regarding the applicability of Section 43B, which was inserted in 1983 but applied to the accounting period ending in 1984. The Tribunal analyzed the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966, distinguishing between tax, duty, and fees, and held that the market fees payable by the assessees were not covered under Section 43B.

Regarding the provision for sales tax, the Tribunal noted that the application of Section 43B would start from April 1, 1984, not applicable to the accounting period ending in March 1984. Citing Supreme Court decisions on tax, duty, and fees, the Tribunal concluded that market fees accrued by the assessees should not be disallowed based on non-payment. The Tribunal also discussed precedents from the Andhra Pradesh High Court regarding the treatment of sales tax collections in various scenarios, emphasizing that the sales tax collections did not constitute trading receipts in the hands of the assessee.

In the final decision, the Tribunal set aside the lower authorities' orders, allowing the provisions made for sales tax liability, market fee, and central sales tax as legitimate deductions from the gross total income for the assessment year 1984-85. The appeals of the assessees were allowed based on the above analysis, overturning the disallowances made by the lower authorities.