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TMI Blog1994 (9) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 6,10,803 (c) Disallowance under section 43B of interest on arrears of sales tax Rs. 7,38,11,883." Initially by mistake the intimation issued by the Assessing Officer on 11-5-1993 was of loss instead of income of Rs. 4,83,10,445. The assessee moved an application on 24-6-1993 under section 154 of the Act for rectification of the mistake said to be apparent in the order under section 143(1)(a) on the ground that the aforesaid three adjustments to the returned income were beyond the scope of section 143(1)(a) as the same do not come under the category of primafacie " adjustments ". On merits also the assessee contended that earlier years' expenses included Rs. 46,88,996 which was provision for gratuity relating to earlier year which was already considered and disallowed under section 43B of the Act. This plea of the assessee was found correct by the Assessing Officer on verification of the plea raised by the assessee and the amount of Rs. 31,31,180 disallowed on account of earlier years' expenses, was deleted vide order dated 21-7-1993 recorded on the application of the assessee moved under section 154 of the Act. The other contention of the assessee was that interest on o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the application under section 154 of the Act was moved by the assessee and that fact makes this issue debatable as the amount of interest on arrears of sales tax is to be treated as part of tax or not or in other words disallowable under section 43B of the Act on the ground of its non-payment or not and once it is debatable question, that goes out of the ambit of section 143(1)(a) of the Act and both the authorities below were not justified in rejecting both the contentions of the assessee. As against this, the learned DR has placed reliance on the orders of the authorities below and contended further that the word 'tax' used in section 43B(a) is used in wider sense and the learned CIT(A) has rightly placed reliance on the decision laid down in the case of Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 (SC) which was based on the similar issue and interest on arrears of cess imposed under the U.P. Sugarcane Cess Act, 1956 was treated as part and parcel of tax and this analogy is applicable to the facts in hand. Secondly, the learned CIT(A) rightly repelled the other contention of the learned counsel for the assessec that the order of the Assessing Officer in the immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gujarat Sales-tax Act and thus the same is not covered in any of the words used in section 43B(a) viz. 'tax', 'duty', 'cess' or 'fee'. 7. In this connection we have to go through the decision of the Supreme Court in the case of Mahalakshmi Sugar Mills Co. and in that case the provisions of the U.P. Sugarcane Cess Act, 1956 were involved. For assessment year 1961-62 the assessee claimed deduction of Rs. 2,00,439 on account of interest paid by it on arrears of cess. This claim was rejected by the ITO but allowed by the AAC and by the Tribunal. On reference, the Hon'ble High Court decided the matter in favour of Revenue and the Hon'ble Supreme Court allowed the appeal in favour of the assessee. Their Lordships reproduced the provisions of section 3 of the U.P. Sugarcane Cess Act, 1956 which provides imposition of cess, interest on arrears of cess and penalty in case of default. The relevant portions of section 3 are as under : " 3. Imposition of cess.--(1) The State Government may by notification in the Official Gazette impose a cess not exceeding four annas per mound on the entry of the cane into the premises of a factory for use, consumption or sale therein ..... (2) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat " in truth, the interest provided for under section 3(3) is in the nature of compensation paid to the Government for delay in the payment of cess and it is not by way of penalty as viewed by the Judges of Hon'ble High Court of Delhi". 8. If we compare the provisions of Gujarat Sales-tax Act to find out whether interest on arrears of sales-tax is on the same footing as the interest on arrears of cess under the U.P. Sugarcane Cess Act, 1956, then we find the provisions of section 47 of the Gujarat Sales-tax Act, 1969 which provide the mode of payment of tax and deferred payment of tax etc. Section 47(2) provides that a Registered dealer furnishing declarations or returns as required by sub-section (1) of section 40, shall first pay into a Government treasury, in the manner prescribed the whole amount of tax due from him according to such declarations or return along with the amount of any penalty payable by him under section 45. Sub-section (3) of section 47 provides that a Registered dealer furnishing a revised declaration or revised return in accordance with sub-section (3) of section 40 which revised declaration or revised return shows that a larger amount of tax then alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying the amount of interest also because the amount of interest becomes automatically due under section 47(4A) of Gujarat Sales-tax Act and no separate order is required to be passed. It is payable as amount of sales-tax and can be recovered as tax amount. Applying this analogy the result will be clear that the amount of interest due on outstanding amount of sales-tax becomes part of sales-tax and it will be covered in the word 'tax' used in section 43B(a) of the Act as the word 'tax' is to be used not in a narrower sense but in the sense it has been interpreted by the Hon'ble Supreme Court in the case cited supra 11. Not only this, the Hon'ble Allahabad High Court in a decision delivered by Full Bench in the case of Triveni Engg. Works Ltd. v. CIT [1983] 144 ITR 732 relied upon the reasoning of Hon'ble Supreme Court in the case of Mahalakshmi Sugar Mills Co. while dealing with the provisions of the U.P. Sugarcane Purchase-tax Act, 1961 and concluded that interest payable on arrears of sugarcane purchase tax is in reality part and parcel of the liability of purchase tax. It again fortifies the above observations of ours and interest payable on arrears of sales-tax is in realit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer allowed the application and deleted the said disallowance relating to amount of interest on arrears of sales-tax. The assessee has filed a copy of application dated 15-5-1992 moved before the CIT Rajkot (appearing at pages 23 to 31 of paper book) in which it was requested that the amount of Rs. 4,26,43,803 on account of interest on outstanding sales-tax disallowed under section 43B of the Act, be deleted. The Assessing Officer vide order dated 11-5-1992 allowed the application of the assessee and deleted the amount of Rs. 4,26,43,803 on account of interest on sales-tax by observing that the matter is highly debatable and it ceased to be prima facie inadmissible. On the basis of this order the contention of the assessee is that the department itself has made this issue debatable and in the case of assessee itself the Assessing Officer took contrary view to the view adopted in the year under consideration and once two views are possible on a particular issue then it is debatable issue and comes out of the scope of word " prima facie ". Reference is made to the instruction No. 1814 (CBDT) Circular No. F. 244/2/89-ITA.II) dated 4-4-1989 a copy of which is placed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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