9911796707
TMI Blog2005 (10) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Income-tax Act, 1961 (the Act for short) made by the Income-tax Appellate Tribunal, Bombay Bench, E, Bombay, (the "Tribunal" for short), referring the following two questions for the opinion of this court; one at the instance of the assessee and, another at the behest of the Revenue, arising from its order dated February 6,1986, passed in I.T.A. No. 1721/Bom/1986, for the assessment year 1982-83 of which the relevant accounting year ended on March 31, 1982: At the instance of the assessee. "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the amount of hotel receipt tax (HRT) collected by the petitioner-company constituted trading receipts? At the instance of the Revenue. (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that for the assessment year 1982-83 the assessee was entitled to a deduction of Rs. 84,95,504 in respect of the hotel receipt tax?" The facts: This reference relates to the amount collected under the provisions of the Hotel Receipts Tax Act, 1980 (the "HRT Act") which received the assent of the hon'ble Pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the hotel receipts tax has been collected along with the sales made by the assessee on the regular day-to-day basis in the course of the assessee's business. The same thus constituted a trading receipt and the accounting treatment given by the assessee is immaterial. The claim for deduction was also rejected since as per the Commissioner of Income-tax (Appeals), the apex court had granted stay of the operation of the Hotel Receipts Tax Act and, therefore, there was no liability on the appellant to make payment of the hotel receipts tax collected from the customers. The amount was, thus, held deductible as a business expense in the year in which the liability arises or the year in which it is discharged, depending upon the method of accounting. Being aggrieved by the aforesaid order of the Commissioner of Income-tax (Appeals), an appeal was carried to the Tribunal. The Tribunal vide its order dated February 6, 1987, held that the hotel receipts tax collected by the assessee was not subject to diversion by overriding title; the obligation to pay could not be discharged out of other receipts also. The same is, therefore, in the nature of trading receipts. As regards the corresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax paid was allowable as a deduction in the relevant assessment year. The High Court held that the amounts collected in the name of "rusum" were income but were not deductible in the assessment year. The apex court reversed and held that the amounts collected in the name of "rusum" constituted business receipts of the assessee. Learned senior counsel for the assessee also relied upon decision of the apex court in the case of Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363 to buttress his submission and to demonstrate correct legal position. Learned senior counsel for the assessee further pressed into service another judgment of the Supreme Court in the case of CIT v. Kalinga Tubes Ltd. [1996] 218 ITR 164. In that case, the assessee-company had manufactured and sold steel tubes. During the previous year relevant to the assessment year 1962-63, the assessee was held liable to pay sales tax under the Central Sales Tax Act. The Sales Tax Officer completed the assessment in respect of the assessment year 1962-63 on March 31, 1966, and demanded an additional amount of Rs. 11,02,698. The assessee unsuccessfully carried appeal before the first appellate authority and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as irrelevant. Learned senior counsel also relied upon the judgment of this court in the case of CIT v. Central Provinces Manganese Ore Co. Ltd. [1978] 112 ITR 734, wherein this court has held that if a statutory liability arises in a particular year, then an assessee maintaining books of account on the mercantile basis is entitled to claim deduction in the year in which the liability arises notwithstanding the fact that the liability was disputed and no entries were made in his books of account. The mere fact that such a deduction was not claimed before the Income-tax Officer was not of much significance. If the liability arises then a claim can be made bona fide at any stage before any higher authority, who is competent to grant relief. While taking this view, the Division Bench has relied upon the judgment of the Madras High Court in the case of Pope the King Match Factory v. CIT [1963] 50 ITR 495. A similar view was taken by the Madras High Court which was approved by the apex court as laying down the correct law. Learned senior counsel for the petitioner based on the above precedents submits that notwithstanding the fact that the dispute having been raised as regards the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case at hand was in the collection itself. He further submits that the obligation to pay always existed in the interim order of the apex court. He, alternatively, submits that assuming it to be a trade receipt, even then by virtue of section 21 of the Act, the same would be deductible in that year. He tried to press into service section 21 and tried to emphasise the words "deductible for that assessment year" appearing in the section. He, thus, submits that on the face of section 21 the assessee is entitled to succeed in the reference at hand. Consideration: Having heard the rival parties, we are of the considered view that the facts involved in the present case are identical with the facts involved in the case of Jonnalla Narashimharao and Co. [1993] 200 ITR 588, wherein the apex court has held that since the appellant therein had maintained its accounts on the mercantile basis, the amounts collected as "rusum" were deductible as business expenditure for the assessment year 1968-69, though they had not been remitted to the treasury in that year. In the case of Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363, the apex court ruled that once it is held that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
