TMI Blog2020 (9) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... the elements of compensation and penalty. Therefore, compensation insofar as payment of tax at full rate is obligatory and something more, is in the character of a penalty. Hence, the assessee shall be entitled to the deduction u/s 37(1) of the Act insofar as the payments partake the element of compensation i.e. upto 100% of the sales tax rate actually payable. We do not concur with the findings of the ld. CIT(A) and we are of the considered view that the differential amount of tax (Normal rate Concessional Rate) and interest on delayed payment of Sales Tax amounting deposited by the assessee is not in the nature of penalty for contravention of any law. Therefore, the assessee is entitled for deduction of such amount u/s 37(1) - Decided in favour of assessee. - ITA No. 02/JP/2020 - - - Dated:- 15-9-2020 - Shri N.K. Saini, V.P. And Shri Sandeep Gosain, JM For the Assessee : Shri Rohan Sogani, CA For the Revenue : Smt. Runi Paul , Addl. CIT- DR ORDER PER SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of ld.CIT (A)- 2, Jaipur dated 08.11.2019 for the Assessment Year 2016-17 passed under 143(3) of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has filed the present appeal before us on the grounds mentioned hereinabove. 2.4 The grounds Nos. 1 and 2 raised by the assessee are interrelated and interconnected and relate to challenging the orders of the ld. CIT(A) in deleting the addition. 2.5 During the course of hearing, the ld.AR of the assessee reiterated the same arguments as were raised by him before the ld. CIT(A). He has also filed the following written submissions for our consideration. 1. BRIEF FACTS 1.1. The assessee company in the preceding years, had made certain inter-state sales, at concessional rate of Sales Tax, against certain forms prescribed under the Central Sales Tax Act, 1956. The assessee company, in such an arrangement, was required to collect the requisite forms from the buyer of the goods, situated in a different state, and thereafter deposit the same with the Sales Tax Authorities in the State of Rajasthan. 1.2 The concessional rate of tax was only applicable when the assessee company after selling the goods could deposit the requisite forms, as obtained from the buyers, with the Sales Tax Authorities. This was in accordance with Section 8(1) of Central Sales Tax Act, 1956.. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of her order. 3.2. Ld. CIT(A), without any cogent basis, upheld the disallowances made by the Id. AO, by simply mentioning that they were on account of contravention of the respective law. Ld. CIT(A) did not appreciate the nature of the expenses incurred and the provisions of the relevant statute. 4. SUBMISSIONS 4.1 Following facts are undisputed - 4.1.1 The liability on account of sales tax was due to the non-deposition of the requisite forms through which the assessee was entitled to collection of Sales Tax at concessional rate. 4.1.ii The liability on account of Interest was due to the reason of delay in deposition of the aforementioned Sales Tax and also custom duty and service tax. 4.2. Since the requisite forms could not be deposited by the assessee company with the Sales Tax Authorities, the assessee company was required to deposit the sales tax amount at normal rate, as against the concessional rates of tax. 4.3. Resultantly, the differential amount of tax (Normal Rate - Concessional Rate), of ₹ 1,82,756, was deposited by the assessee company. 4.4. Such amount of tax deposited by the assessee company is certainly not in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce is placed on the below mentioned judicial pronouncements: - Supreme Court 4.11.i Lachmandas Mathuradas [2002] 122 Taxman 828 (SC) Enclosed Page 8) 4.11.ii Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 (SC) Jurisdictional High Court 4.11.iii Udaipur Distillery [1986] 24 TAXMAN 282 (Raj - HC) (Enclosed Page 12) 4.11. iv Rajasthan Central Stores (P. ) Ltd. [1984] 19 Taxman 163(Rajasthan HC) 4.11.v C.G. Sanghi [1984] 18 Taxman 380 (Rajasthan HC) 4.11.vi Western Indian State Motors [1987] 163 ITR 194 (Rajasthan HC) 4.12. Hon'ble Jurisdictional High Court in Udaipur Distillery [1986] 24 TAXMAN 282 held that, The liability of interest on delayed payment of sales tax is a statutory obligation of the dealer and is automatic as no specific order is required. Thus, it is a part of sales tax and as the sales tax is paid by a dealer for the purpose of carrying on business, the amount of interest will for all purposes be considered to be an amount spent wholly and exclusively for the purpose of business. It may be stated that it is well settled that neither necessity nor motive nor reasonableness is the test for allowing deduction of expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O during the course of assessment proceeding disallowed the claim of the assessee for the sole reason that same had been incurred on account of violation of law. 2.9 After having heard the ld. counsels for both the parties at length and also appreciating the facts of the present case, we found that since the requisite forms could not be deposited by the assessee to the Sales Tax Department, therefore, the assessee company was required to deposit the sales tax amount at normal rate as against concessional rate of tax, resultantly, the differential amount was deposited by the assessee company. In our view, such amount of tax deposited by the assessee company is certainly not in the nature of penalty for contravention of any law. It was only a tax which was paid by the assessee company as route of concessional rate of tax was blocked as the assessee was not able to deposit the requisite forms with the Sales Tax Department. On similar circumstances, the Hon'ble Supreme Court in the case of Malwa Vanaspati Chemicals Co. (1972) 92 Taxman 537 (SC) had held that where the assessee had to pay the amount of tax at actual rates instead of concessional rates and something more, then ..... X X X X Extracts X X X X X X X X Extracts X X X X
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