1998 (1) TMI 114 - AT - Income Tax

Summary

Issues Involved:
1. Deduction of liability for interest payable under sections 139(8) and 215/217 of the Income Tax Act.
2. Deduction of liability of Rs. 3,61,133 relating to a foreign supplier.
3. Deduction of disputed customs duty of Rs. 43,82,802.
4. Deduction of interest payable on customs duty.
5. Deduction of penalties under sections 18(1)(a), 271(1)(c), 273, and 271(1)(a).
6. Addition of Rs. 5,00,000 to the admitted wealth.
7. Deduction of bonded warehouse charges.

Detailed Analysis:

1. Deduction of Liability for Interest Payable Under Sections 139(8) and 215/217 of the Income Tax Act:
The appeals for the assessment years 1980-81 to 1984-85 challenged the CIT (Appeals) decision to allow the liability for interest payable under sections 139(8) and 215/217. The tribunal noted that the liability to pay interest arises only after the completion of assessment. Since the CIT, Central-I waived the interest for all years via an order dated 27-3-1996, there was no liability on the valuation dates. Therefore, this ground of appeal by the Revenue was allowed, reversing the CIT (Appeals) decision.

2. Deduction of Liability of Rs. 3,61,133 Relating to a Foreign Supplier:
The Revenue contested the CIT (Appeals) decision to allow a liability of Rs. 3,61,133 claimed by the assessee for goods imported from a foreign supplier. The tribunal found that the facts of the dispute and the treatment of the goods for wealth-tax purposes were unclear. The issue was restored to the Assessing Officer to gather relevant details, such as the import date, settlement date, and whether the value of the goods was included in the total wealth of the assessee. This ground was allowed for statistical purposes.

3. Deduction of Disputed Customs Duty of Rs. 43,82,802:
The CIT (Appeals) allowed the deduction of disputed customs duty, which was contested by the Revenue. The tribunal noted that the liability for customs duty, which was disputed and stayed by the High Court, could not be considered a "debt owed" under section 2(m) of the Wealth-tax Act. The tribunal cited several Supreme Court and High Court decisions emphasizing that a disputed liability is not a debt owed until the dispute is resolved. Therefore, this ground of appeal was decided in favor of the Revenue.

4. Deduction of Interest Payable on Customs Duty:
The CIT (Appeals) directed the Assessing Officer to ascertain and allow the interest payable on customs duty. The tribunal found that no interest was demanded by the Customs Authority and that liability for interest arises only when the customs duty is finally determined. Since the dispute was pending before the High Court, there was no liability for interest on the valuation date. This ground of appeal was allowed, reversing the CIT (Appeals) decision.

5. Deduction of Penalties Under Sections 18(1)(a), 271(1)(c), 273, and 271(1)(a):
The CIT (Appeals) allowed the deduction of penalties imposed during the financial year 1987-88. The tribunal noted that no penalties were levied before the valuation date of 31-3-1986, and the imposition of penalties is discretionary. Since no demand for penalties was raised on the valuation date, the CIT (Appeals) decision was reversed, and the Assessing Officer's order was confirmed. This ground of appeal was allowed in favor of the Revenue.

6. Addition of Rs. 5,00,000 to the Admitted Wealth:
The Assessing Officer added Rs. 5,00,000 to the total income of the assessee, which was deleted by the CIT (Appeals) on the ground that no money was available with the assessee on the valuation date. The tribunal confirmed the CIT (Appeals) decision, noting that the addition was deleted in the income-tax proceedings, and there was no basis for including it in the net wealth of the assessee. This ground of appeal was dismissed.

7. Deduction of Bonded Warehouse Charges:
The tribunal found that the Dy. CIT (Appeals) did not properly consider the facts related to bonded warehouse charges. The issue was restored to the file of the Dy. CIT (Appeals) to determine when the liability arose and when the payment was made. The Dy. CIT (Appeals) was directed to bring all relevant facts on record and give adequate opportunity to both the Assessing Officer and the assessee. This ground of appeal was allowed for statistical purposes.

Conclusion:
The tribunal allowed the appeals for the assessment years 1980-81, 1981-82, and 1982-83 for statistical purposes, allowed the appeals for the assessment years 1983-84 and 1984-85, and treated the appeal for the assessment year 1986-87 as allowed for statistical purposes. Appeals for the assessment years 1978-79, 1979-80, and 1985-86 were also treated as allowed for statistical purposes.