Cit, Meerut vs Uptron Powertronics Ltd.

ORDER

1. The Income Tax Appellate Tribunal, Delhi has referred the following question of law under section 256(1) of the Income Tax Act, 196 1, (hereinafter referred to as "the Act") for opinion to this Court.

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in confirming the order of the CIT (Appeals) by deleting the addition of Rs. 6,45,047 made under section 43B of the Income Tax Act, 1961."

2. The present Reference relates to the assessment year 1985-86.

3. Briefly stated the facts giving rise to the present reference are as follows:

The respondent-assessee has been assessed to income-tax in the status of I a company. Its accounting period ended on 31-12-1984. It is engaged in manufacture of power plant, float rectifiers, battery charges, switching cubicles microwave power plants, mobile rectifiers, inverters float chargers, air compressors, etc. It filed its return on 28-6-1985 declaring income of Rs. 10,60,259. Thereafter a revised return declaring income at Rs. 9,74,933 was filed on account of claim of expenses relating to the financial year ending on 31-12-1984, which has been debited to the accounts of subsequent assessment years. The assessing officer completed the assessment under section 143(3) of the Act and computed the assessees total income at Rs. 16,49,120, While doing so, the assessing officer made an addition of Rs, 6,45,037 by disallowance under section 43B of the Act. The aforesaid amount of Rs. 6,45,037 comprises the following items:

As per tax audit report As per tax audit report 14,151 14,151 ESIC ESIC 6,790 6,790 PF Payable PF Payable 16,702 16,702 Central Sales Tax payable Central Sales Tax payable 4,64,802 4,64,802 EFPF payable EFPF payable 2,566 2,566 Local Sales Tax payable Local Sales Tax payable 43,125 43,125 Surcharge payable on local sales-tax Surcharge payable on local sales-tax 154 154 5,48,290 5,48,290

4. According to the respondent-assessee, cheques of Rs. 89,689, Rs. 638 and Rs. 19,000 on account of Central Sales Tax, Local Sales-tax and gratuity payments respectively were issued for payment but the same were not presented as on 31-12-1984, i.e., which was the last date of the accounting period of the respondent-assessee. Since these payments were not made as on the date of closing of accounts, they were treated as unpaid amounts and were not allowed as according to the assessing officer mere issuing of cheques does not amount to actual payment thereof. He had also issued a show-cause notice calling upon the respondent-assessee to show cause as to why the Sales-tax may not be disallowed under section 43B of the Act. The respondent-assessee submitted its explanation in which it was mentioned that unpaid liability for sales tax collected from the customers does not fall under the purview of section 43B of the Act. As per accounting practice adopted by the respondent-assessee, sales tax collected from the customers is credited to a separate account and all the payments of Sales tax department are debited to this account and no such amount under this head is charged to profit and loss account. According to the respondent-assessee, section 43B is attracted only on those statutory payments which have been charged to profit and loss account and for which deduction has been claimed but the amount remains unpaid at the end of the financial year. The assessing officer did not accept the explanation offered by the respondent-assessee and treated the entire unpaid amount as income by taking resort to section 43B of the Act. The assessing officer was of the view that even though the amount was not claimed as deduction in the profit and loss account, such collections represent the trading receipt and the method of accounting does not make any difference. Feeling aggrieved, the respondent-assessee prefer-red an appeal before the Commissioner (Appeals). The Commissioner (Appeals) allowed and appeal and has directed that a sum of Rs. 5,93,088 + Rs. 19,000, which has been paid during the statutory period after verification should be allowed as deduction. The order of Commissioner (Appeals) has been upheld by the Tribunal.

5. We have heard Sri Shambhu Chopra, learned Standing counsel for the revenue. No body has appeared on behalf of the respondent-assessee.

6. It may be mentioned here that even though the amount mentioned in the question of law referred to was Rs. 6,45,047 but the real amount involved in the present Reference is only Rs. 6,12,088. In view of the findings recorded by the Commissioner (Appeals), which has been affirmed by the Tribunal that the amount in question had been paid over to the Government departments with the statutory period even though it fell under subsequent assessment year the principle laid down by the Apex Court in the case of Allied Motors (P) Ltd. v. CIT (1997) 224 ITR 6771, is fully applicable to the facts of the present case. We answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the revenue with the observation that the amount of Rs. 6,45,088 be reduced as Rs. 6,12,088. However, there shall be no order as to costs.