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TMI Blog2016 (1) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... We will first take-up revenue's appeal in 4985/Mum/2011 vide which following ground has been raised:- "Whether on the facts, in the circumstances and in law, the Ld. CIT(A) erred in directing to delete the addition of Rs. 5.29 Crores made by the AO on account of gain on settlement of Sales Tax Deferral Loan ignoring that the Assessee availed benefit u/s 43B of the IT Act in earlier years and the receipt on account of settlement of Sales Tax Deferral Loan is Revenue in nature and not Capital Receipt". 2. At the outset, both the parties agreed that this issue is covered in favour of the assessee by the order of the Tribunal in assessee's own case for the assessment year 2006-07, wherein the Tribunal following the decision of ITAT Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a particular rate of interest for the period for which there was prepayment of liability, each liable to be taxed as interest u/s.2(28A) of the LT. Act, as this section clearly provides that interest includes any amount in respect of any credit facility which was not utilized." (3) "Originally the liability of the assessee is for outstanding sales tax payable to the state government which was deferred later on under the incentive scheme of state government and converted into sales tax loan thus trying to make it as the loan liability rather than the trading liability, which itself raises the following two questions: (a) whether this issue means that trading liability of assessee ceases to exist? (b) In case of some remission, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cash right and this right is in kind and is convertible into money, so considering that this benefit is covered under gains, thus business income and whether section 28(iv) should be applicable here or not?" (6) "The remission of sales tax liability has arisen in the normal course of business and is out of business operation and u/s.28(i) and 28(iv) of the LT. Act, which is straightway taxable. This is because sales tax receipt is part of trading receipt and sales tax payment is a trading liability. Reduction in trading liability is profit under normal course of business." (7) "By conversion of sales tax into loan, the assessee gets the right to retain government money for the particular number of years without any interest liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conversion." Now, in wake of the detailed decision of the jurisdictional High Court, all these arguments and grounds raised by the revenue have not much consequence, however we are admitting the said grounds purely on academic grounds. But we are of the opinion that the only issue involved here is addition of Rs. 5.29 crores on account of settlement of sales-tax deferral loan which issue is now squarely covered by the decision of Hon'ble jurisdictional High Court. Therefore, respectfully following the judicial precedence we confirm the order of the first appellate authority deleting the said addition. Accordingly, the grounds raised by the revenue are treated as dismissed. 5. Now we will come to grounds raised in assessee's appeal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY 2005-06 and 2006-07 on similar nature of disallowance of interest has decided this issue in favour of the assessee. 11. On the other hand, Ld. DR relied upon order of the CIT(A) who has confirmed the disallowance made by the AO. 12. After considering the rival contentions, we find that the natures of disallowance of interest are delayed payment on excise duty or delayed payment of sales-tax. These are more or less compensatory in nature and cannot be held as any infraction or violation of any law. Such a payment of interest on delayed payment or excess credit also cannot be disallowed as it is pure compensatory and accordingly, the order of the CIT(A) on this score is reversed. We find that the Tribunal in assessee's own case for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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