TMI Blog1986 (7) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... e 20th of August and as the accounts were closed before this date, this sum was shown as payable. Similarly the sales tax collected during the first half of August was also shown as payable as it becomes due for payment only on the 20th of September. (2) Assessee has not claimed any deduction of sales tax in computing the income liable to tax. (3) Assessee is merely holding the sales tax collections on behalf of the State Government and that it does not belong to the firm on any account as it is collected on behalf of the State Government." The ITO countered the objections of the assessee in the following manner: "(1) With effect from 1-4-1984 as per section 43B any tax or duty payable to the Government will be allowed as a deduction only on actual payment. Hence, if the assessee has made the payment in the subsequent year, it will certainly be given as a deduction during the subsequent assessment year; (2) It is not correct to say that the assessee has not claimed any deduction of sales tax in computing the income chargeable to tax. According to the decision of the Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 sales tax collecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is strengthened by reference to that decision and not under section 43B, I will confirm the action of the Income-tax Officer." Against the order of the Commissioner (Appeals) the assessee has preferred the present appeal. 4. At the time of hearing the assessee's counsel, Shri L. Rangamani, Chartered Accountant, filed a paper book containing copy of sales tax account from 17-8-1982 to 16-8-1983, copy of sales tax account from 17-8-1983 to 19-9-1983, copy of profit and loss account for the year ended 16-8-1983 and copy of balance sheet as on 16-8-1983. His arguments were to the following effect: The assessee, when he collected the sales tax from the purchasers, acted only as a trustee on behalf of the State Government. The sales tax collections did not belong to him as a trader. They were to be made over to the State Government in the prescribed manner as per section 22 of the Kerala General Sales Tax Act, 1963. The prescribed date for payment of the sales tax collections is 20th of the succeeding month as per rule 21(7) of the Kerala General Sales Tax Rules, 1963. If there is any failure on the part of the trader in making over the sales tax collections to the State Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and payable to the State Government. Hence, the question of applying section 43B does not arise. In case the Tribunal were to hold against the assessee, the entire amount of Rs. 1,35,502 standing on the liabilities side of the balance sheet of the assessee cannot be taken as the income of the assessee. The actual sales tax collections in the year of account amounted to only Rs. 7,66,009. The actual payments made by the assessee in the year of account were Rs. 7,40,169. Only the difference, i.e., Rs. 25,840 has to be treated as the assessee's income for the year under consideration. 5. The arguments of the departmental representative were to the following effect: According to section 5 of the Kerala General Sales Tax Act, the liability to pay sales tax is on the assessee-dealer. It is not correct on the part of the assessee to say that the assessee-dealer acts as a trustee on behalf of the State Government for the sales tax collections made by it. The liability is not on the purchaser of the goods from the assessee. Section 22 is only an enabling provision allowing the assessee to collect the sales tax from its customers. Sales tax collections form part of the trading receipts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income but for the apparent difficulty posed by the newly introduced section 43B. So, we have to examine the implications of section 43B. The CBDT in its Circular No. 372 dated 8-12-1983, explained the provisions of section 43B and its implications as under: "Disallowance of unpaid statutory liability---Section 43B 35.1 Under section 145 of the Income-tax Act, profits and gains of business or profession are computed in accordance with the method of accounting regularly employed by the assessee. Broadly stated, under the mercantile system of accounting, income and expenditure are accounted for on the basis of accrual and not on the basis of actual receipts or disbursements. For the purposes of computation of profits and gains of business or profession, section 43(2) of the Income-tax Act defines the word 'paid' to mean 'actually paid or incurred' according to the method of accounting on the basis of which the profits or gains are computed. 35.2 Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, etc., for long periods of ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
