1990 (1) TMI 130 - AT - Income Tax

Summary

Issues:
- Addition of Rs. 30,112 under provisions of 43B
- Interpretation of sales-tax payable as trading receipts
- Application of decisions in Sinclair Murray & Co. and Chowringhee Sales Bureau cases
- Statutory liability to pay sales-tax collected

Analysis:
The appeal before the Appellate Tribunal ITAT Jaipur was focused on the addition of Rs. 30,112 made by the ITO under the provisions of 43B. The appellant, an individual trading in general merchandise, contested this addition for the assessment year 1987-88. The ITO contended that the amount reflected as "sales-tax payable" in the balance-sheet should be added to the returned income since it remained unpaid at the end of the accounting year. The ITO considered sales-tax receipts as part of trading receipts, citing the decisions in Sinclair Murray & Co. and Chowringhee Sales Bureau cases.

The appellant argued before the first appellate authority that there was no statutory liability to pay the sales-tax collected at the end of the accounting year, as there was time available under the law to discharge the liability. Additionally, it was highlighted that the amount in question was deposited later and was not claimed as a deduction in the profit and loss account. The Dy. CIT(A) rejected these arguments, upholding the ITO's disallowance based on the Supreme Court decisions cited.

During the appeal, the appellant's counsel referred to a Tribunal decision in the case of ITO vs. K.S. Lokhandwala, which considered relevant amendments and facts similar to the present case. The counsel stated that the amount in question had been paid within the statutory time provided by the sales-tax legislation of the State and before filing the income-tax return for the assessment year. The Tribunal, after examining the submissions and previous orders, found the appellant's case aligned with the decision in ITO vs. K.S. Lokhandwala. Consequently, the Tribunal canceled the addition made by the ITO under section 43B.

In conclusion, the Appellate Tribunal ITAT Jaipur allowed the appeal, ruling in favor of the appellant based on the application of the judgment in the case of ITO vs. K.S. Lokhandwala and canceling the addition made under section 43B.