SHRI RAMESH CHANDRA PUNERA,UTTRAKHAND vs. ITO, UTTRAKHAND

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ITA 5796/DEL/2013Status: DisposedITAT Delhi25 April 2016AY 2010-114 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 43B is not attracted when the assessee has not claimed any deduction for the VAT payable in its profit and loss account. Following the Delhi High Court's decision, the Tribunal ruled that disallowing a deduction not claimed is not permissible.

What were the facts?

The assessee, running a petrol pump and transportation business, showed VAT payable on the liability side of its balance sheet. The revenue sought to disallow this amount under Section 43B, arguing it should be part of turnover and then deducted. The assessee contended that no deduction was claimed in the P&L account, making Section 43B inapplicable.

What were the issues?

Whether Section 43B of the Income Tax Act can be invoked to disallow an amount shown as VAT payable in the balance sheet when no deduction has been claimed in the profit and loss account.

Which sections of the Income-tax Act were involved?

Section 43B

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI

Before: SHRI J. SUDHAKAR REDDY & SH. LALIT KUMAR

ORDER

PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER

1.

This is an appeal filed by the assessee directed against the order of the Ld.Commissioner of Income Tax (Appeals)-II, Dehradun dated 22.8.2013 for the Assessment Year 2010–11, on the following grounds .

1. That on the facts and in the circumstances of the case, the Ld.CIT(A)’s order is entirely erroneous in law and facts of the case. He has confirmed the additions made by AO for Rs.1,06,447/- in respect of disallowance u/s 43B for VAT payable shown under liability side of balance sheet though no deduction under profit &loss ITA 5796/Del/2013 A.Y. 2010-11 Sh. Ramesh Chandra Punera was claimed. In such circumstances S.43B is not at all attracted. The order passed by AO and confirmed by CIT(A), without understanding legislative intention w.r.t. section 43B. Therefore action of CIT(A) is not correct in law, unjustified and deserves to be deleted.

2. The question before Ld.CIT was whether the VAT payable shown in liability side of balance sheet will be disallowed u/s 43B and not the question whether VAT collected formed part of assessee’s trading receipt. The squarely covered case (1993) 200 ITR 759 (Gau.) India Carbons Ltd. vs. Inspecting Assistant CIT was provided to Ld.CIT and he could not understand correct interpretation of law. The order of Ld.CIT is bad in law and therefore the addition confirmed by him deserves to be deleted.”

2.

Facts in brief:- The assessee is an individual and is in the business of running a petrol pump, transportation etc. He has income from house property, business and profession as well as other sources. The sole issue that is agitated before us is, whether section 43B of the Income Tax Act, 1961 (the Act) can be invoked to disallow an amount, when the assessee has not claimed any deduction while computing its income from business. It is the case of the assessee that a separate account is maintained for VAT collected from the customers and paid to the authorities. It is the case of the revenue that the assessee should necessarily take into account the VAT collected from its customers into its turnover and thereafter claim deduction as per section 43B. 2.1. The revenue relies on the decision of the Hon’ble Supreme Court in the case of Chowringhee Sales Bureau (P) Ltd. vs. CIT (1973) 87 ITR 542 and Sinclair Murray & Co. (P) Ltd. vs. CIT (1974) 97 ITR 615 for the proposition that a tax or duty is part of the ITA 5796/Del/2013 A.Y. 2010-11 Sh. Ramesh Chandra Punera dealer’s trading or business receipt even if the tax or duty is charged separately or credited to a separate account in the dealer’s books. Revenue also relied on the order in the case of Food Specialities Ltd. vs. ACIT of the Delhi ‘C’ Bench of the ITAT.

3.

After considering rival submissions we are of the considered opinion that the issue in question is covered in favour of the assessee and against the revenue by the decision of the Jurisdictional High Court in the case of Commissioner of Income Tax vs. Noble and Hewitt (I) Pvt. Ltd. (2008) reported in 305 ITR 324 (Del.). The Hon’ble Jurisdictional High Court held that “since the assessee did not debit the amount to the profit and loss account as an expenditure not claimed any deduction in respect of the amount and considering that the assessee was following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise.” 3.1. Respectfully following the binding decision of the Jurisdictional High Court we allow this appeal of the assessee.

4.

In the result the appeal of the assessee is allowed. Order pronounced in the Open Court on 25th April, 2016.

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