1991 (12) TMI 117 - AT - Income Tax

Tribunal rules in favor of assessee on sales-tax disallowance under section 43B

The Tribunal allowed the appeal, ruling in favor of the assessee regarding the disallowance of the sales-tax amount under section 43B and the ... - Issues:1. Disallowance of sales-tax amount under section 43B.2. Applicability of the first proviso to section 43B introduced by the Finance Act, 1987.Analysis:1. The issue in this case revolves around the disallowance of a sales-tax amount under section 43B. The Assessing Officer disallowed a sum of Rs. 38,602, representing Central Sales-tax and State Sales-tax, as it was not added to the assessee's total income. The Deputy Commissioner (Appeals) upheld this disallowance under section 43B, stating that sales-tax receipts constituted trading receipts. The Deputy Commissioner increased the disallowance amount to Rs. 49,879, considering the deduction had already been allowed in the previous assessment year. However, the Tribunal held that the sales-tax liability could not be treated as income since it was collected on behalf of the government and paid within the statutory period. The Tribunal also considered various legal precedents, including the decision in the case of Bijlee Cotton Mills, and concluded that no addition under section 43B was warranted in this case.2. The second issue pertains to the applicability of the first proviso to section 43B introduced by the Finance Act, 1987. The Tribunal analyzed various decisions on whether the amendment was prospective or retrospective. While some decisions viewed the amendment as retrospective, others, including the Delhi High Court, took a contrary view. Following the principle of favoring the assessee in situations with conflicting interpretations, the Tribunal held that no addition under section 43B was justified based on the facts of the case. The Tribunal emphasized the need to adopt a view favorable to the assessee when faced with divergent legal interpretations.In conclusion, the Tribunal allowed the appeal filed by the assessee, ruling in favor of the assessee on both issues related to the disallowance of the sales-tax amount under section 43B and the interpretation of the first proviso to section 43B introduced by the Finance Act, 1987.