1988 (7) TMI 102 - AT - Income Tax

Tribunal Affirms Income Tax Officer's Decision on Sales Tax Inclusion

The Tribunal affirmed the Income-tax Officer's decision to include sales tax amounts in the total income of the assessee as trading receipts. The ... Deduction, Deduction Only On Actual Payment Issues:1. Addition of sales tax amount to total income.2. Disallowance of telephone and car expenses.3. Interpretation of section 43B of the Income Tax Act.4. Consistency in accounting methods.5. Applicability of legal precedents.Detailed Analysis:1. The main issue in this case was the addition of a sum of Rs. 1,59,108 to the total income of the assessee by the Income-tax Officer. The Income-tax Officer added this amount as sales tax, which the assessee had taken directly to the balance sheet instead of the trading and profit and loss account. The Commissioner of Income-tax (Appeals) considered the reasons given by the Income-tax Officer and held that the disputed amounts should be included in the total income of the assessee as they constituted part of the trading receipts. The Tribunal, relying on Supreme Court judgments, affirmed that sales tax amounts should be treated as trading receipts and included in the turnover of the assessee.2. The disallowance of telephone and car expenses was also a significant issue in this case. The Income-tax Officer had disallowed a portion of these expenses for personal use, which was partially upheld by the Commissioner of Income-tax (Appeals). The Tribunal dismissed the grounds related to these disallowances, stating that there was no evidence to interfere with the decisions of the lower authorities. The Tribunal also noted that the provisions of section 38(2) of the Act did not support the assessee's objection to the disallowance of proportionate depreciation on the car.3. The interpretation of section 43B of the Income Tax Act was crucial in this judgment. Section 43B pertains to deductions allowed only on actual payments, irrespective of the year in which the liability was incurred. The Tribunal held that the assessee's method of maintaining a separate account for sales tax collection did not alter the fact that these amounts should be included in the turnover and total income of the assessee. The Tribunal emphasized that the deduction for such amounts was not admissible as the payment was made after the relevant financial year.4. The Tribunal also addressed the issue of consistency in accounting methods. The assessee claimed to have consistently followed a particular method from earlier years, but this claim was not presented before the lower authorities. The Tribunal held that even if the method was consistent, it would not make a difference in light of the Supreme Court judgments and the provisions of section 43B.5. The Tribunal discussed the applicability of legal precedents cited by the assessee, including a Special Bench judgment and a judgment of the Cuttack bench of the Tribunal. The Tribunal found that these judgments did not apply to the current case as they were based on different issues and did not address the specific matters at hand. The Tribunal upheld the decisions of the lower authorities regarding the inclusion of sales tax amounts in the total income of the assessee and the disallowance of deductions for these amounts due to non-payment within the relevant financial year.