TaxTMI 
TaxTMI 
2009 (8) TMI 1197
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....ssessing Officer be restored." 2. Apropos Ground No.1, the facts relevant are that it was noticed by the Assessing Officer that out of sales-tax deferment of Rs. 629.26 lakhs as shown as outstanding in balance sheet, liability to the extent of Rs. 42.21 lakhs pertained to previous year relevant to the assessment year under consideration. The Assessing Officer asked the assessee to produce certificate in Form D for ensuring that sales-tax deferment was converted into loan by respective Government authority. In response, the assessee vide its letter dt.26.3.2007 stated that the amount of sales-tax deferment was treated as loan by the Commercial Tax Department. The assessee produced a copy of letter dt.23.3.2007 from the Department of Commercial Taxes, Belgauim. The assessee also referred to Circular No.496 dt.25.9.2987 and also relied on the decision in the case of CIT v. Mahalaxmi Bricks Manufacturing Pvt. Ltd [273 ITR 190 (P & H)] and CIT v. Bhagwati Autocast Ltd [261 ITR 481 (Guj)]. Considering the submissions as well as the provisions of law contained in Section 43B of the Income-tax Act,1961, the Assessing Officer disallowed the amount of Rs. 42.21 lakhs and added the same to....
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....CIT v. Perfect Pumps (P) Ltd [(2007) 212 CTR (MP) 145. Considering the above submissions and evidence produced in support, the learned CIT(A) deleted the disallowance by observing in his order vide paragraph 3.2 as under : "3.2. The submissions made by the A.Rs have been verified and the documents furnished are also examined. It is seen that the appellant has been given the Sales Tax liability deferment benefit by the Karnataka Government. Therefore, I find that the appellant's claim is in is order. Form No. D as in Gujarat Government is not applicable to unit in Karnataka Government. Hence, the A.O. is directed to delete the disallowance made by him. Therefore, this ground of appeal is allowed." 4. Heard both parties and perused the material on record. To resolve the controversy, we may first refer to Circle No.496 (F.No.201/34/86-IT(A-II) dt.25.9.1987, which is reproduced as under : "Several State Governments have introduced sales-tax deferral schemes as a part of the incentives offered to entrepreneurs setting up industries in back-ward areas. Under these schemes, eligible units are permitted to collect sales-tax and retain such tax for a prescribed period. ....
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....y M.P. High Court in CIT v. K.N. Oil Industries (226 ITR 547)(MP) and also by Hon'ble Supreme Court in the case of CIT v. Gujarat Polyerete Pvt. Ltd (246 ITR 463)(SC). Reading of these decisions suggests that provisions of Circular No.496 would apply only if a State Government had amended its Sales Tax Act to provide that the sales tax that was deferred under an incentive scheme framed by it would be treated as actually paid, so as to meet the requirements of section 43B of the Income-tax Act. 6. The facts undisputed are that the assessee is having manufacturing unit in Karnataka. Karanataka Government had amended the Sales Tax Act for providing deferment of the Sales Tax liability and to treat the said sales tax collected as loan for use of the assessee Company. In this connection, we may refer to Section 19C of the Karanataka Sales Tax Act,1957, which is reproduced as under : "19C- POWER OF GOVERNMENT TO NOTIFY EXEMPTION OF TAX OR DEFERRED PAYMENT OF TAX FOR NEW INDUSTRIES. (1) The government may, in such circumstances and subject such conditions as may be prescribed, by notification defer payment by any new industrial unit of the whole or any part of the tax....
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....,000 on account of deferment of sales tax. Accordingly, we dismiss ground No.1 of the Revenue. 7. Ground No.2 relates to deletion of the addition of Rs. 1,71,544 made on account of prior period expenses. 8. The learned DR contended that the Assessing Officer made the impugned addition on the ground that though the expenses were crystalised in past but bills were received late and payments were made in the Assessment Year under consideration, the learned CIT(A) is not justified in allowing the same. The learned DR, on the other hand, supported the impugned order of the learned CIT(A) and contended that the learned CIT(A) is justified in his action since the expenses in question were crystalised during the Assessment Year under consideration. 9. Having heard both sides, we have carefully gone through the impugned orders of the authorities below. In the assessment order, the Assessing Officer himself observed that the bills were received late. The said expenses are crystalised, finalized, determined and accounted during the Assessment Year under consideration. The learned DR could not controvert the above fact. In the case of Saurashtra Cement And Chemical Industries Limited ....