2016 (3) TMI 1009 - AT - Income Tax

Accrual of income - Assessment of income - nature of receipt - assessee has received power escalation charges from CSEB - department has taken a view that the said amount is taxable on accrual basis, therefore, made additions for the assessment year 2008-09 - Held that - CIT(A) after considering the facts and circumstances of the case, held that it is settled principles of law that there cannot be double taxation of any income and set aside the issue to the file of the A.O. with a direction to consider the assessee s submissions. In case the appeal of the assessee for the assessment year 2008-09 is dismissed, then the relief should be allowed for assessment year 2009-10. In case, the appeal of the assessee for the assessment year 2008-09 is allowed in favour of the assessee, then no relief should be given for the assessment year 2009-10. The sum and substance of the CIT(A) s order is that the income is taxable either for the assessment year 2008-09 or for the assessment year 2009-10 and it cannot be taxed for both the assessment years. We concurred with the decision taken by the CIT(A). It is settled proposition of law that no income shall be taxed twice. In the present case on hand, the A.O. has accepted that the income has been taxed by the department for the assessment year 2008-09. As rightly contended by the assessee it can be taxed either for the A.Y. 2008-09 or 2009-10 and it cannot be taxed for both the years. Therefore, we are of the opinion that, the CIT(A) has rightly set aside the issue to the file of the A.O. with the above direction. We do not find any error or infirmity in the order passed by the CIT(A) - Decided against revenue Disallowance of sales tax and service tax on payment basis - addition u/s 43B - Held that - We are of the opinion that CST and Service tax paid under protest is deductible in the year in which such liability was paid u/s 43B of the Act, irrespective of whether such liability was incurred in any previous year. Therefore, we direct the A.O. to delete the additions made u/s 43B of the Act.- Decided against revenue

Summary

Issues Involved:
1. Double taxation of income received as escalation charges from Chattisgarh State Electricity Board (CSEB).
2. Disallowance of deduction claimed for sales tax and service tax paid under protest under Section 43B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Double Taxation of Income Received as Escalation Charges from CSEB:

The assessee, a limited company engaged in the manufacture and sale of various products, received Rs. 1,61,49,497/- from CSEB towards escalation charges of electricity for the financial years 2006-07 and 2007-08. The Chattisgarh State Electricity Regulatory Commission had enhanced the sale price of power, which was challenged by CSEB but ultimately upheld by the Appellate Tribunal for Electricity in November 2009. The assessee recognized this income in the financial year 2008-09 relevant to the assessment year 2009-10 due to the uncertainty of recoverability until the Tribunal's final order.

The department, however, taxed this income on an accrual basis for the assessment year 2008-09, leading to double taxation. The assessee argued before the CIT(A) that the same income was being taxed in two different assessment years, which is against the settled principles of law. The CIT(A) directed that if the appeal for the assessment year 2008-09 was dismissed, relief should be allowed for the assessment year 2009-10, and vice versa. The Tribunal upheld this decision, emphasizing that no income should be taxed twice and agreeing that the income should be taxed either in the assessment year 2008-09 or 2009-10, but not both.

2. Disallowance of Deduction Claimed for Sales Tax and Service Tax Paid Under Protest:

The assessee claimed a deduction of Rs. 21,59,515/- towards CST and service tax paid under protest, under Section 43B of the Income Tax Act. The A.O. disallowed this deduction, arguing that the liability was not admitted in the books of accounts and hence not crystallized during the year. The CIT(A) upheld this view, stating that without crystallization of liability, the deduction under Section 43B was not allowable.

The Tribunal, however, clarified that Section 43B allows deductions on an actual payment basis, irrespective of the year in which the liability was incurred. The provision states that any sum payable by way of tax, duty, cess, or fee is deductible in the year it is actually paid. The Tribunal cited the ITAT Mumbai decision in Euro RSCG Advertising (P) Ltd. vs. ACIT, which supported the view that payment under protest does not alter the nature of the expenditure. Consequently, the Tribunal directed the A.O. to allow the deduction for CST and service tax paid under protest in the year of payment, i.e., the assessment year 2009-10.

Conclusion:

The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal. The order emphasized that:
- Income should not be taxed twice, and appropriate relief should be granted based on the outcome of the pending appeal for the assessment year 2008-09.
- Deductions under Section 43B are allowable on an actual payment basis, regardless of whether the payment was made under protest or the liability was recognized in the books of accounts.