TMI Blog2014 (11) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... tent 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 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 and on such payment the entire liability to pay tax/loan stood discharged - Again it is not a benefit conferred on an assessee - Sectio n41 (1) of the Act is not attracted - the Tribunal was justified in holding that there is no liability to pay tax – thus, the order of the Tribunal is upheld – Decided against revenue. - Income Tax Appeal No.899/2008 - - - Dated:- 2-9-2014 - MR. N KUMAR AND MRS. RATHNAKALA, JJ. For the Appellant : Sri K V Aravind Advocate For the Respondent : Smt S R A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee preferred an appeal before the Commissioner of Income tax (Appeals). The Appellate Authority held presuming, but not accepting that it is a loan independent of it originally being deferred Sales Tax, then also provisions of Section 41(1) would be applicable since it is a benefit arising out of an item on which expenditure has already been allowed. He confirmed the order of the Assessing Authority. Considering the alternative argument of the assessee, the Appellate Authority held that, if it is treated as Revenue in nature, the same can be taxed only in the year 2017. He held that a sum of ₹ 952.6 lakhs as reduction in loan liability is liable to tax, but not in one year and only a proportion of it. As the benefit accrues over a period upto the year 2017, only a proportion as applicable to the year concerned is to be considered. 4. Aggrieved by the said order both the assessee as well as the Revenue preferred appeals before the Tribunal. The Tribunal on consideration of the rival contentions taking note of the statutory provisions and the several decisions on which reliance was placed held, when the deferred sales tax have been deemed to have been paid, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in passing the impugned order and no case for interference is made out. 7. In the light of the said rival contentions the substantial question of law that arises for our consideration is, Whether the Tribunal was correct in holding that the assessee is not liable to pay tax in respect of the amount of ₹ 9,52,61,916/- which was collected as BST and CST on behalf of Maharashtra State and allowed as a deduction during the assessment year 2003-04 which was waived during the current assessment year 2004- 05 and had been brought to tax under Section 41 of the Act? 8. As per the incentive scheme announced by the Government of Maharashtra, the assessee entered into an agreement with the Governor of Maharashtra to avail the benefits under deferral/1993 scheme which provides for deferment of payment of taxes. This agreement not only determines the eligibility of the assessee but also lays down the terms and conditions under which the agreement exists. The quantification of this deferment was made by Sicom Limited, a Government of Maharashtra Undertaking, which was an agent for the package scheme of incentives. M/s Sicom Limited quantified the entitlement of deferral o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion reads as under:- 41. Profits chargeable to tax. 1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the firstmentioned person) and subsequently during any previous year (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the firstmentioned person or some benefit in respect of the trading liability referred to in clause (a) by way ..... 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