2020 (2) TMI 162 - HC - Income Tax

High Court upholds ITAT order on sales tax treatment for AY 2009-10. No substantial legal questions found.

The High Court of Bombay dismissed the Appeal challenging the Income Tax Appellate Tribunal's order for the Assessment Year 2009-10. The Court found no ... Difference between deferred sales tax liability and its Net present value - HELD THAT:- Tribunal in the impugned order while deciding the question regarding difference between deferred sales tax liability and its Net present value has opined against the Appellant revenue following the decision of this Court in case of CIT v. Sulzer India Ltd. [2010 (11) TMI 728 - ITAT, MUMBAI] . The learned Counsel for the Appellant has fairly brought to our notice decision of the Supreme Court in the case of Commissioner of Income Tax-6, Mum. vs. Balkrishna Industries Ltd .[2017 (11) TMI 1626 - SUPREME COURT] to point out that the question raised would stand covered against the Appellant revenue and the decision of this Court in CIT vs Sulzar is affirmed by the Supreme Court in this decision. In the circumstances, no substantial question of law arises. Issues involved:Appeal challenging order of Income Tax Appellate Tribunal under Section 260A of the Income Tax Act 1961 for Assessment Year 2009-10. Appellant-Revenue raises questions regarding treatment of deferred sales tax liability, remission of sales tax liability, and prepayment of sales tax.Analysis:1. Treatment of Deferred Sales Tax Liability:The Appellant contested the Tribunal's decision to treat the deferred sales tax liability as exempt from tax, arguing that it should be considered as business income chargeable under Section 41(1) of the Income Tax Act. The Tribunal relied on the decision in CIT v. Sulzer India Ltd. to support its stance. The Appellant pointed out the Supreme Court's decision in Commissioner of Income Tax-6, Mum. vs. Balkrishna Industries Ltd., which affirmed the position taken in CIT v. Sulzar. Consequently, the Court held that no substantial question of law arose in this regard and dismissed the Appeal.2. Remission of Sales Tax Liability:The Appellant raised concerns about the remission/cessation of sales tax liability being treated as a capital receipt, arguing that it should be taxable based on previous court decisions. The Tribunal's decision to treat the remission as a capital receipt due to its conversion into an interest-free loan was challenged by the Appellant. However, the Court upheld the Tribunal's decision based on the precedents cited and the lack of a substantial question of law.3. Prepayment of Sales Tax:Regarding the prepayment of sales tax and the difference between the Net Present Value (NPV) and future liability, the Appellant argued that the retained amount in the business should be considered as cessation/remission of liability under Section 41(1) of the IT Act. The Tribunal's decision to ignore the prepayment as a transfer under Section 2(47) of the Income Tax Act was contested by the Appellant. However, the Court upheld the Tribunal's decision, citing the conversion of the liability into an interest-free incentive and the lack of a substantial question of law.In conclusion, the High Court of Bombay dismissed the Appeal challenging the Income Tax Appellate Tribunal's order for the Assessment Year 2009-10. The Court found no substantial questions of law in the issues raised by the Appellant regarding the treatment of deferred sales tax liability, remission of sales tax liability, and prepayment of sales tax based on relevant legal precedents and decisions.