TMI Blog1991 (5) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... ax from the parties to whom the tea was sold. The assessee maintained a separate sales-tax account. The sales-tax collected from the parties was credited and sales-tax paid to the Government was debited in this sales-tax account. The credit balance outstanding in the said account was taken to balance sheet. No amount was debited to profit and loss account and as such provisions of section 43B of the Income-tax Act, 1961 were not applicable. The ITO observed that the sales-tax collected by the assessee amounted to trading receipt as held by the Supreme Court in Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 and the sales-tax that was not paid to the Government constituted liability but in view of the provisions in section 43B, the said liability was not allowable as deduction. Consequently, he made addition of Rs. 4,18,302 under the head "sales-tax liability". The assessee filed appeal before the CIT(A). The CIT(A) did not discuss the various submissions made before him. He merely stated that for reasons stated in the assessment order he was satisfied that no interference was called for. The assessee has now come in further appeal before us and the above mentioned addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts were similar. The assessee had maintained a separate sales-tax account in which sales-tax collected from customers was credited and sales-tax paid to the Government was debited. There was a balance of Rs. 16,647 in this account which represented unpaid sales-tax of the last quarter. This balance was carried on to the balance sheet and not to the profit and loss account. The ITO made addition in respect of this amount, as according to him, the amount of sales-tax collected represented trading receipt in view of the decision of the Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. and the unpaid sales-tax liability was not allowable as deduction in view of the provisions in section 43B of the Act. The assessee filed appeal before the CIT(A) who followed the decision of the Tribunal and deleted the addition in respect of the about amount. The Department has now come in appeal before the Tribunal. 6. Shri J.P. Shah has argued on behalf of the assessee in ITA No. 229/Ahd./1988. Shri K.C. Patel has argued on behalf of assessee in ITA No. 1387/Ahd/1988 while Shri N.R. Divatia has argued on behalf of assessee in ITA No. 3193/Ahd/1987. Shri V.S. Shah the learned Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting year. It is an admitted position that the amounts involved in these three appeals pertain to the last quarter and that under the provisions of the Gujarat Sales tax Act the said amounts were not payable to the Government on any date in the relevant accounting year and that the said amounts were payable on dates which fell in the subsequent accounting year. It has been laid down by Andhra Pradesh High Court in Srikakollu Subba Rao Co. v. Union of India [1988] 173 ITR 708 that in order to apply the provision of section 43B (as it stood prior to amendments by Finance Act, 1987 and Finance Act, 1989) not only should the liability to pay the tax be incurred in the accounting year but the amount also should be statutorily "payable" in the accounting year. According to the A.P. High Court if under the provisions of any statute a tax was payable after the close of the accounting year, unamended provisions of section 43B would not be applicable. It is thus clear that under the unamended provisions of section 43B, no disallowance could have been made in respect of sales-tax liability with which we are concerned in these appeals as the said liability pertained to the last quarter and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ahmedabad were concerned, the consistent view taken is that the said proviso was applicable with effect from assessment year 1984-85 and as such in respect of assessment years 1984-85 to 198788 if the assessee has paid the amount in question before the due date applicable in his case for furnishing the return of income under section 139(1), deduction in respect of the liability should be allowed as the bar contained in section 43B would not be applicable. The leading decision on this point is ITO v. K.S. Lokhandwala [1989] 31 ITD 305 (Ahd.). Detailed reasons have been given in said decision and it is not necessary to reiterate those reasons in this order. Suffice it to say that the Benches of the Tribunal at Ahmedabad have been consistently following this decision and the point in controversy has been referred to the High Court and references are pending in the High Court in respect of this question. 10. Since conflicting views on this point had been expressed in the decisions of the Benches at Delhi, Special Bench was constituted at Delhi by the President of the Tribunal under section 254(3) of the Act. The decision of the Special Bench at Delhi has been reported in Rishiroop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded as an interpretation clause or a clause which explains what is meant by "actually paid" and that the interpretation given to the words "actually paid" in the proviso is different from its literal interpretation and that the proviso had been inserted to clear the doubt as to the meaning of "actually paid" in section 43B and as such the Finance Act, 1987, so far as the proviso was concerned, was an explanatory Act and that it would be without object unless it was construed retrospective in operation. It was further observed that if section 43B as inserted by the Finance Bill, 1983 was interpreted to mean that deduction could be claimed only if payment of sales-tax was made in fact during the accounting year of the assessee, it would be requiring the assessee to do an impossibility, because in respect of the last quarter the liability could not have been cleared in the accounting year itself. If the said proviso was literally interpreted it would be struck down as it provided for doing an impossible act and that it could be upheld by holding that an assessee for the assessment year 1984-85 was entitled to have the benefit of the proviso introduced by the Finance Act, 1987. The Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to follow the view which has been taken by the Benches of the Tribunal at Ahmedabad which is reflected in the decision in K.S. Lokhandwala 's case or whether we should now depart from that view and take the view in favour of Department by following the decision of the Special Bench and two decisions of Delhi High Court particularly when there is a decision of Patna High Court which is in favour of assessee and which has taken the same view as had been consistently taken by the Benches at Ahmedabad. 14. Shri J.P. Shah, Shri K.C. Patel and Shri Divatia made submissions on behalf of the assessee referred to above. They submitted that we should not depart from the consistent view which is being taken at Ahmedabad particularly when there are conflicting decisions of High Courts. It was emphasized that the matter was pending in references before the Gujarat High Court and as far as the Benches of Tribunal at Ahmedabad were concerned the matter would be finally decided by the decision of Gujarat High Court which would be binding on the Benches at Ahmedabad. It was further submitted that when there are conflicting decisions, the decision in favour of assessee should be followed as lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Bench has been constituted to resolve the conflict and that if the decision of Special Bench was not followed, the very purpose of constituting the Special Bench would be frustrated. It was also submitted that the decision of the Ahmedabad Bench of Tribunal in the case of K.S. Lokhandwala should be regarded to have been overruled by the Special Bench of the Tribunal and should not now be followed. It was submitted that since there was no decision of jurisdictional High Court, decision of the Special Bench should be followed. Reliance was placed on the decisions in C.D. Thadani, ITO v. Universal Ferro Allied Chemicals Ltd. [1988] 172 ITR 30 (Bom.), Bardolia Textile Mills v. ITO [1985] 151 ITR 389 (Guj.)(FB) and CED v. N. A. Merchant [1975] 101 ITR 270 (Guj.) 16. We have considered the rival submissions. We find that much can be said in favour of the view taken by Patna High Court in favour of assessee as well as the view taken by Delhi High Court in favour of Department. The point is highly debatable. As already stated, there was no conflict in the decisions of the Ahmedabad Bench of the Tribunal on the point in controversy. No decision has been brought to our notice in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to the assessee by considering all aspects without feeling bound by the ruling of the Special Bench covered by the High Court ruling. A further appeal was filed before the Division Bench of Bombay High Court and the Division Bench set aside that direction. The Division Bench observed that the learned Single Judge had not considered the question whether the decision of the Special Bench was correct or not and as such the direction issued was erroneous. The Division Bench also observed as follows :-- "Once the Special Bench of the Tribunal records the decision after considering the judgment given by the High Court, then, the decision of the Special Bench of the Tribunal is binding on other authorities subordinate to the Tribunal and it is not permissible for those subordinate authorities to ignore the decision of the Tribunal on the ground that the decision of High Court was in conflict with it." It is on these observations that the learned Departmental Representative has placed reliance. We find that this decision is not of any assistance in the present case. The ratio of said decision is that if the Special Bench of the Tribunal had considered a particular decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is wrong to think that the effect of a Special Bench is to overrule a Division Bench case. To an ITO both the decisions are of equal authority though the Special Bench view may be entitled to a greater respect because it is the expression of collective wisdom of more members than constituting a Division Bench. The constitution of Special Bench has assumed greater significance of late not because it is entitled to overrule a Division Bench view but because it is considered necessary to secure uniformity in the views expressed by various Benches of the Tribunal located in various stations in the country. The divergence of views will promote litigation. The reduction of conflict in views will reduce litigation and enhance the faith of litigants in the working and administration of the Tribunal as a judicial body. That does not mean either in fact or in law or in the contemplation of the Special Benches that the Special Bench will overrule a Division Bench view. If sufficient grounds are shown to show that the Special Bench has not considered an important and vital aspect, it is open to a Division Bench to express an opinion on those points." It is clear from the view expressed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or it should be allowed only in the year in which payment is made. Besides, the controversy is only for three years viz. assessment years 1984-85 to 1987-88. We see no justifiable reasons as to why the question of allowance or disallowance should stand on different footing for these three years than from assessment years 1988-89 onwards. In the memorandum explaining the provisions in the Finance Act, 1989 by which Explanation 2 was inserted with retrospective effect from assessment year 1984-85 it was expressly mentioned that the proviso which was introduced by the Finance Act, 1987 was intended to remove hardship caused to certain taxpayers who had represented that since the sales-tax for the last quarter cannot be paid within that previous year, the original provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter. Thus the proviso had been introduced to remove the hardship in respect of the sales-tax liability for the last quarter. It could not be said that the said hardship was only from assessment year 1988-89 and was not there in assessment years 1984-85 to 1987-88. Consequently, for harmonious construction of all the provisions it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts may not be decided in this appeal. 23. We may also mention that there was a small point in respect of donation of Rs. 1001 in ITA No. 229/Ahd/1988. The CIT(A) has directed the ITO to examine the claim. In view of that direction, this ground is liable to be rejected. 24. In ITA No. 1387/Ahd./1988 in the case of Gujarat Ship Trading Corporation there is another ground which is to the effect that the learned CIT(A) had erred in directing to allow deduction under section 80HH and 80-I of the Income-tax Act, 1961. The facts are that the assessee firm was carrying on business of ship breaking. The assessee pleaded that the assessee was an industrial undertaking and as such deduction under sections 80HH and 80-I were allowable. The assessee had explained that more than 20 workers had been employed and other conditions were fulfilled. The assessee relied on decision of CIT(A) in the case of M/s. Rama Ship Breakers in which it was held that activity of ship breaking amounted to industrial undertaking. The assessee also relied on a decision of Bombay High Court. The ITO disagreed with the said decisions. He held that the assessee was not industrial undertaking and rejected the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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