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TMI Blog2018 (4) TMI 1269X X X X Extracts X X X X X X X X Extracts X X X X ..... of income - Held that:- CIT(Appeals) correctly found that the excess sales tax at the rate of 4% was collected by the assessee and the same was remitted to the Government account. The CIT(Appeals) also found that the sales tax collected and paid was not reflected in the Profit & Loss account. In those circumstances, this Tribunal is of the considered opinion that the excess sales tax collected and remitted to the Government account cannot be construed as income of the assessee. Disallowance u/s 40A(2)(b) - whether the standard of service maintained by the assessee is on par with the market rate which is otherwise available in the market? - Held that:- It is necessary for the Assessing Officer and the CIT(Appeals) to ascertain from marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax. 3. Shri B. Sahadevan, the Ld. Departmental Representative, submitted that the assessee was expected to collect sales tax at the rate of 2%. However, the assessee collected 4% and surcharge at 5% thereon. Therefore, according to the Ld. D.R., the Assessing Officer found that the excess collection has to be treated as trading receipt, hence, the Assessing Officer made the addition of ₹ 27,00,000/-. 4. On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that what was collected by the assessee was deposited with Sales Tax Department. According to the Ld. counsel, there was a confusion with regard to the rate of tax, therefore, the assessee sought clarification from Commercial Tax Officer. The Comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to Jet Airways for the excess amount collected. The Commercial Tax Officer adjusted the balance amount of ₹ 18,87,096/- towards penalty under the Sales Tax Act. According to the Ld. D.R., the penalty and the amount to the extent the credit note issued to Jet Airways cannot be allowed as deduction. 8. On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the excess amount was collected at the rate of 4% instead of 2%. The Commercial Tax Officer clarified that the assessee has to collect only 2% by a letter dated 7th May, 2003. The amount collected over and above the sales tax was also paid to the Government account. Once the entire amount is remitted to the Government account, according to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee is supplying food and beverages to the airlines and also rendering laundry service. To carry out laundry service, the assessee engaged its sister concern. The payment made to sister concern is less than the market rate. According to the Ld. counsel, the laundry services are provided to employees of the airlines, therefore, the assessee has to incur expenditure for providing the services. According to the Ld. counsel, Taj Coromandel of Oriental Hotels Ltd. is a sister concern of the assessee and paid ₹ 32,47,468/- towards laundry charges. The laundry service included sorting, counting, washing, dry cleaning, ironing, pressing, packing and loading of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the assessee are on par with market rate. No doubt, the laundry service needs to be provided at the highest standard required by the airlines. The question arises for consideration is whether the standard of service maintained by the assessee is on par with the market rate which is otherwise available in the market? Therefore, it is necessary for the Assessing Officer and the CIT(Appeals) to ascertain from market what is the reasonable rate that could have been paid by the assessee for similar service to the third parties. In the absence of any such examination, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, orders of both the authorities below are set aside and the disallowance made b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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