Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, ‘ C’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
This appeal of the Revenue is directed against an order dated 25.02.2016 of the Commissioner of Income-tax (Appeals)-15, Chennai. Its grievance is that ld. Commissioner of Income Tax (Appeals) deleted an addition of �2,20,63,819/- made by the ld. Assessing Officer u/s.41(1) r.w.s 28(iv) of the Act.
ITA No.1578/Mds/2016 :- 2 -:
Revenue has filed this appeal with a delay of ten days.
Condonation petition has been filed. Reasons shown for the delay are justified. Delay is condoned. Appeal is admitted.
Facts of the case are that assessee had availed deferred 3. scheme for sales tax liability called interest free sales tax deferral scheme introduced by Tamil Nadu Government in May, 1990. As per this scheme, eligible units were allowed to collect sales tax and retain it for a prescribed period. Assessee had opted for this scheme for a nine year period. In other words, as per this scheme assessee was to remit the sales tax collected by it during the period of nine years, after such period either in lumpsum or in installments. However, Government through a G.O.No.48 had allowed an option to persons taking the benefit of deferral scheme, to pay the deferred tax in one lumpsum at the discounted rate of 8%. In other words it allowed premature payments of the due amounts at a sum discounted at the rate of 8%. Assessee availed this scheme and against the deferred tax of �5,79,43,346/- for the period 1.4.2006 to 31.08.2007, it made actual payment of �3,58,79,527/-, taking advantage of the 8% discounting. In other words, assessee received a rebate of �2,20,63,819/-. Ld. Assessing Officer was of the opinion that assessee
ITA No.1578/Mds/2016 :- 3 -: the benefit received by assessee fell within Sec. 41(1) read alongwith section 28(iv) of the Act. He made an addition of �2,20,63,819/-.
Assessee’s appeal before ld. Commissioner of Income Tax (Appeals) was successful. The ld. Commissioner of Income Tax (Appeals) following the judgments of Hon’ble Karnataka High Court in the case of CIT vs. M/s. Mcdowell & Co Ltd 369 ITR 684 and that of Hon’ble Bombay High Court in the case of CIT vs. Sulzar India Ltd 369 ITR 717 held that Sec. 41(1) of the Act was not attracted to such benefit on account of prepayment at discounted rate.
Now before us, the ld. Departmental Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that similar issue was decided in favour of the Revenue by the Apex Court in the case of CIT vs. Thirumalaiswamy Naidu & Sons 230 ITR 534 and Polyflex (India) Pvt. Ltd vs. CIT 257 ITR 343.
Per contra, the ld. Authorised Representative strongly supported the orders of the authorities below.
We have considered the rival contentions and perused the orders of the authorities below. The Revenue is relying on two cases
ITA No.1578/Mds/2016 :- 4 -: decided by the Apex Court viz Thirumalaiswamy Naidu & Sons(supra) and Polyflex (India) Pvt. Ltd (supra). In the case of Thirumalaiswamy Naidu & Sons(supra) the question was whether sales tax refund could be considered as trading receipts when entire amount of sales turnover including amount of tax collected was included in assessee’s income. As for the case of Polyflex (India) Pvt. Ltd (supra) the question was whether refund of excise duty could be considered as profit chargeable u/sec. 41(1) of the Act. Both the said cases had nothing to do with premature payment effected at discounted under a sales tax deferral scheme. As against this, the observation of Karnataka High Court in the case of M/s. Mcdowell & Co Ltd (supra) relied on by the ld. Commissioner of Income Tax (Appeals) for giving relief to the assessee read as under:-
‘’12. In the instant case, as per the scheme he was allowed to retain the sales tax as determined by the competent authority and pay the same 15 years thereafter. The tax collected was deemed to have been paid and, therefore, the tax so collected cannot be construed as income in the hands of the assessee. The tax so retained by the assessee is in the nature of a loan given by the Government as an incentive for setting up the industrial unit in a rural area. The said loan had to be repaid after 15 years. Again, it is an incentive. However, by a subsequent scheme, a provision was made for premature payment. When the assessee had the benefit of making the payment after 15 years, if he is making a premature payment, the said amount equal to the net present value of the deferred tax was determined at Rs. 4,25,79,684 and on such payment the entire liability to pay tax/loan
ITA No.1578/Mds/2016 :- 5 -: stood discharged. Again, it is not a benefit conferred on an assessee. Therefore, section 41(1) of the Act is not attracted to the facts of this case. Hence, the Tribunal was justified in holding that there is no liability to pay tax. Under these circumstances, we do not see any error committed by the Tribunal in passing the impugned order. The substantial question of law is answered in favour of the assessee and against the Revenue’’.
In view of the above, we are of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in giving relief sought by the assessee. We do not find any reason to interfere.
In the result, the appeal of the Revenue is dismissed. 8.
Order pronounced on Friday, the 21st day of October, 2016, at Chennai.