CIT vs. KISAN SERVICE AGENCY

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ITR/541/1995HC Punjab & HaryanaPHHC01032533199506 September 2006Author: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
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What did the High Court hold?

The High Court held that the issue is covered against the revenue and in favour of the assessee by the judgment of the Hon'ble Supreme Court in Allied Motors (P) Limited v. Commissioner of Income Tax, reported in 1997 (224) ITR 677. Following this Supreme Court judgment, the High Court decided the issue against the revenue and in favour of the assessee. The High Court had previously decided a similar issue against the revenue and in favour of the assessee in its order dated 05.09.2005 in ITR No.94 of 1996, The Commissioner of Income tax (C), Ludhiana v. M/s Avery Cycle Inds. Pvt. Limited, Ludhiana. Accordingly, the question of law referred to the High Court is answered against the revenue and in favour of the assessee.

What were the facts?

The Commissioner of Income Tax (CIT) is the appellant and Kisan Service Agency is the respondent. The assessment year in question is 1985-86. The order under challenge is the order of the Income Tax Appellate Tribunal (ITAT), Chandigarh, dated 12.02.1993. The ITAT had confirmed the order of the Commissioner of Income Tax (Appeals) [CIT(A)] who had deleted an addition of Rs. 2,57,283/-. This addition was made on account of unpaid sales tax liability shown in the balance sheet. The High Court of Punjab and Haryana is hearing a reference from the ITAT on a question of law.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT(A) who deleted the addition of Rs. 2,57,283/- made on account of unpaid sales tax liability shown in the balance sheet under section 43-B of the Income Tax Act, 1961? The revenue's contention, implied by the reference of the question of law, is that the unpaid sales tax liability should have been added back to the assessee's income under Section 43-B of the Income Tax Act, 1961, as it was a statutory liability not paid within the relevant financial year. The assessee's contention, as evidenced by the deletion of the addition by the CIT(A) and confirmation by the ITAT, is that the unpaid sales tax liability was not disallowable under Section 43-B. The High Court relies on a Supreme Court judgment.

Which sections of the Income-tax Act were involved?

Section 43-B

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.541 of 1995 Date of decision: 06.09.2006 Commissioner of Income Tax ---Appellant Vs. Kisan Service Agency -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Mr. Yogesh Putney, Advocate for the appellant. -----

ORDER: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh, arising out of its order dated 12.2.1993 in respect of assessment year 1985-86:- “Whether on the facts and in the circumstances of the case, the I.T.A.T. was right in law in confirming the order of the C.I.T.(A) who deleted the addition of Rs.2,57,283/- made on account of unpaid sales tax liability shown in the balance sheet under section 43-B of the I.T. Act, 1961?” We find that the issue is covered against the revenue and in favour of the assessee by the judgment of Hon’ble Supreme Court in Allied Motors (P) Limited v. Commissioner of Income Tax

1997 (224) ITR 677. Following the above judgment of the Hon’ble Supreme Court, we have decided the issue against the revenue and in favour of the assessee vide our order dated 5.9.2005 in ITR No.94 of 1996, The Commissioner of Income tax (C), Ludhiana v. M/s Avery Cycle Inds. Pvt. Limited, Ludhiana..

Accordingly, the question is answered against the revenue and in favour of the assessee. ( ADARSH KUMAR GOEL ) JUDGE September 06, 2006 ( RAJESH BINDAL ) ashwani JUDGE

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