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TMI Blog1991 (3) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... r sales-tax which may be credited in respect of supplies of cables made to M/s. Western India Erectors Ltd. (for short W1) during the accounting years 1980-81 and 1981-82. The company had not charged any sales-tax on the supplies of cables to the aforesaid customer as they had submitted Form No. 17-A prescribed under Gujarat Sales-tax laws. It was contended on behalf of the assessee before the assessing authority that the matter relating to levy of sales-tax on the transaction of sale was doubtful and therefore, they obtained opinion from the legal expert Shri S.L. Modi, who opined that sales-tax would be leviable on such transactions. Shri Modi in his letter dated 24-7-1980 addressed to the appellant company stated that as W1 have not obtained any licence under the Gujarat Sales-tax Act, it is not possible to accept Form No. 17-A from them and their request of not charging sales-tax cannot be accepted. He further observed that since the contract of sale executed with them occasioned movement of goods from the State of Gujarat to various other States, such a transaction will be regarded as an inter-State sale which will attract Central sales-tax at the rate of 10% if no C-Form is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l depreciation under section 32(1)(iia) and investment allowance only in respect of additions to those items of machinery which were installed during the year under consideration, provided other conditions for grant of such deductions are fulfilled. 6. Before us, the learned counsel for the assessee submitted that the provision of sales-tax payable amounting to Rs. 27,25,770 made in respect of sales made to W1 relates two years and the bifurcation of the figures was as under:--- (a) Rs. 15,40,615 relates to accounting year ended on 30-6-1981. (b) Rs. 11,84,944 relates to year ending on 30-6-1982. It was pointed out by him that till the end of accounting year ended on 30-6-1982 the assessee was under a bona fide belief that it may have to pay sales-tax in respect of such sales made to W1. Such bona fide belief was based on opinion obtained from sales-tax expert Shri S.L. Modi. He invited our attention to letters dated 24-7-1980 and 20-8-1980 sent by Shri S.L. Modi, Advocate of the assessee in which he has indicated that the terms of existing contract executed with M/s. W1 will attract sales-tax liability. Thereafter, the matter was discussed in joint meetings. Copies of note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessment year 1985-86. In assessment year 1984-85 the provision written back amounting to Rs. 15,40,615 had been included in the taxable income and the assessee went in appeal before the CIT(A). The CIT(A) had disposed of that appeal on 22-6-1989 but in advertently omitted to give his decision in relation to this item of addition, for which, the assessee submitted a miscellaneous application. The same was heard in January, 1991 and the order of the CIT(A) is awaited. In assessment year 1985-86 the amount of Rs. 11,34,682 written back and credited in the profit and loss account has been allowed as deduction on the ground that it has been disallowed in the year under consideration. The learned counsel of the assessee strongly urged that deduction in respect of the sales-tax provision amounting to Rs. 27,25,700 should be allowed as a deduction in the year under consideration. 7. The learned Departmental Representative supported the orders of the departmental authorities. It was pointed out that the sales-tax liability created by the Sales-tax Officer for the accounting year 1980-81 was based on the fact that the customer company did not have licence under the provisions of Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration had already been made by the Sales-tax Officer in which it was held that the assessee is not liable to pay any sales-tax in respect of the sales in question. On this ground also, the learned CIT(A) was fully justified in confirming the disallowance. 8. We have carefully considered the rival submissions made by the learned representatives and have also gone through the orders of the Departmental authorities as well as other documents to which our attention was drawn during the course of hearing. The assessee received an order for supply of cables worth Rs. 251 lakhs form WI by an order dated 20-2-1980 and the first consignment was due on 8-10-1980. It appears that WI insisted that no sales-tax should be charged as they proposed to deliver Form No. 17-A prescribed under the provisions of Gujarat State Sales-tax laws. The assessee obtained legal opinion from Shri S.L. Modi who as stated above indicated that the assessee may be liable for payment of sales-tax on the supplies to M/s. W.T. under the said contract of sale. The assessee company wrote letter dated 5-5-1982 to WI saying that all the sales-tax liability including penalty and interest will be payable by WI and they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the same was recoverable from the customer company. We are, therefore, of the considered view that the CIT(A) has rightly confirmed the aforesaid disallowance. 9. The second ground raised by the assessee relates to denial of grant of additional depreciation and investment allowance in respect of foreign exchange rate difference relatable to the machinery installed during the earlier years. 9.1 The learned counsel for the assessee contended that this matter is clearly covered in favour of the assessee by the decision of the Tribunal in the case of Windsor Foods Ltd. [IT Appeal No. 728 (Ahd.) of 1984, dated 1-12-1984]. 9.2 The learned Departmental Representative pointed out that the various conditions for grant of additional depreciation under section 32(1)(iia) and conditions prescribed for grant of investment allowance are not fulfilled in relation to the aforesaid ground, as it has been admitted by the assessee that the ground in question related to machinery installed in earlier years. Both these deductions can be granted only in the year in which the machinery is installed or in the immediately subsequent year, when it is first put to use. Since these conditions are app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r), was a party. Following the said view taken by the Tribunal/in the said case, we confirm the findings given by the CIT(A) in this regard. 10. In view of the aforesaid discussions, the assessee's appeal No. 786/Ahd/1988 is dismissed. 11. Now, we will consider assessee's appeal No. 787/Ahd/1988 against the order passed by the CIT(A) confirming the levy of interest under section 215. In the assessment order passed on 20-3-1986 the Income-tax Officer issued a show cause notice for charging interest under section 215. Thereafter, he passed a separate order after hearing the assessee and levied interest of Rs. 12,89,170 --- under section 215. The CIT(A) has confirmed the said order. 11.1. Before us, the learned counsel for the assessee contended that the CIT(A) has erred in holding that no appeal is maintainable against the order charging interest under section 215 passed by the Income-tax Officer. It was submitted that the assessee has denied its liability to be assessed in respect of total amount of interest charged under section 215 and the appeal against said order is clearly maintainable in view of the judgment of the Gujarat High Court in the case of Bhikhoobhai N. Shah v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying on the decision of the Gujarat High Court in the case of Bharat Machinery Hardware Mart has challenged the total levy of interest on the ground that after excluding the addition made on account of disallowance of sales-tax provisions, there will be no short-fall in the payment of advance-tax made by the assessee. To support this contention the learned counsel has submitted a chart explaining the position of advance-tax paid by the assessee which is as follows:--- A. Position as per return of income Rs. 1. Total income as per return of income dated 27-6-1983 8,83,179 2. Tax on income returned 4,97,893 3. Adv.Tax and TDS paid 5,00,728 4. Refund due 2,835 B. Position as per assessment 1. Income assessed after appeal effect dated 8-3-1988 33,52,520 Less : Provision for sales-tax included in the assessed total income 27,25,770 -------------------- Balance Rs. 6,26,750 -------------------- Tax on Rs. 6,26,750 IT 55% Rs. 3,44,712 SC 2 1/2% Rs. 8,018 3,53,330 2. Advance tax and TDS 5,00,728 In view of the aforesaid decisions, the appeal submitted by the assessee against the order charging interest under section 215 is clearly maintainable. 11.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate that the assessee had entertained the doubt about the sales-tax liability in a bona fide manner. Even a mistaken belief about the accrual of such sales-tax liability may still be a bona fide belief for the purposes of determining the assessee's liability for payment of advance-tax. It is well settled law that for the purpose of determining the assessee's liability for advance-tax payable by them, the estimate has to be an estimate of current income, which according to the assessee's own bona fide estimate was its current income at the contemporary period, when such estimate of advance-tax is filed. If we visualise the state of mind of the persons responsible for furnishing the estimate in the month of December 1982 or till the end of the financial year 1982-83 the bona fides of their entertaining a doubt about the sales-tax liability cannot be suspected. If the aforesaid items of sales-tax provision is excluded, the amount of pre-paid taxes by way of advance-tax and TDS is found to be more than the tax due and there will be no short-fall as prescribed in section 215 of the IT Act. We are therefore, of the considered view that the assessee's case is clearly covered by the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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