TMI Blog2010 (7) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... see. AJAY KUMAR MITTAL, J. 1. The Income Tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as "the Tribunal") has referred the following question of law on a direction issued by this Court in ITC No. 83 of 1992 for opinion of this Court under Section 256 (2) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 1987-88:- "Whether on the facts and in the circumstances, the Appellate Tribunal was right in law in deleting the addition made on account of receipt of Excise Duty Refund when the provisions of section 41(1) read with section 43B of the Income-tax Act, 1961 are applicable in the case of the assessee?" 2. The facts as noticed in the statement of case are that the assessee filed its retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Tribunal accepting the plea of the assessee, partly allowed the appeal vide order dated 10.12.1990. 3. We have heard the learned counsel for the revenue. 4. Learned counsel for the revenue submitted that in view of Section 41(1) of the Act, since there was cessation of the liability in the year under consideration, the same was exigible to tax and placed reliance upon the judgment of the Apex Court in Polyflex (India) Pvt. Ltd. v. Commissioner of Income-tax, 257 ITR 343. Learned counsel further submitted that the reliance of the Tribunal on the Apex Court judgment in Hindustan Housing Land Development Trust Limited's case (supra) was misplaced. According to the learned counsel, once the liability had ceased during the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee. This is the first step. Coming to the next step the assessee must have subsequently (i) obtained any amount in respect of such loss or expenditure, or (ii) obtained any benefit in respect of such trading liability by way of remission or cessation thereof. In case either of these events happen, the deeming provision enacted in the closing part of sub-section (1) comes into play. Accordingly, the amount obtained by the assessee or the value of benefit accruing to him is deemed to be profits and gains of business or profession and it becomes chargeable to income-tax as the income of that previous year." 8. The issue in Polyflex (India) Pvt. Ltd's case (supra) before the Hon'ble Supreme Court was similar as in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the business expenditure incurred by it during an earlier year, for which the assessee had the benefit of deduction or allowance. Normally, the payment of certain amount to discharge the statutory levy such as sales tax, excise duty in the course of carrying on business is an expenditure. If authority is needed, we may refer to Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363, wherein this court held that the amount of sales tax paid or payable by the assessee is an expenditure within the meaning of section 10 (2) (xv) of the Act. We are inclined to think that in a case where a statutory levy in respect of goods dealt in by the assessee is discharged and subsequently the amount paid is refunded, it is the first cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of liability has to be applied vis-a-vis trading liability and it cannot be projected into the previous clause." 9. We may now advert to the judgment of the Apex Court in Hindustan Housing Land Development Trust Limited's case (supra) on the basis of which the Tribunal had adjudicated the issue in favour of the assessee. In that case certain lands of the company were compulsorily acquired by the Government. Award was announced by the Land Acquisition Collector granting Rs.24,97,249/- as compensation and thereafter arbitrator had fixed the quantum of compensation at Rs.30,10,873/-. State Government had challenged the award of the arbitrator by filing an appeal before the High Court and during the pendency of the said appeal, an a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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