2020 (9) TMI 760

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....e action of the AO in disallowing the claim of the assessee company of Rs. 1,82,756/- incurred on account of non-submission of certain forms. The action of the ld. CIT(A) is illegal, unjustified and arbitrary and against the facts of the case. Relief may please be granted by quashing the disallowance of Rs. 1,82,756/-. Due to prevailing COVID-19 pandemic condition, the hearing of the appeals are concluded through video conference. 2.1 Brief facts of the case are that the assessee company filed its E-ITR for the Assessment Year 2016-17 on 27-09-2014 declaring total income of Rs. 85,37,500/-. The AO completed the assessment u/s 143(3) of the Act vide order dated 01-12-2018 at a total income of Rs. 1,08,80,140/- resulting into addition of Rs. 23,42,640/-. 2.2 Aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who vide order dated 8-11-2019 has sustained the addition of Rs. 4,57,734/- by observing as under:- ''3.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. Assessee claimed interest of Rs. 2,74,978/- paid on various delay in payment which includes delayed payment of sale....

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.... deposited the requisite forms, it was not entitled to the Sales Tax at concessional rate and normal rate of tax was made applicable on such transactions. 1.5. Resultantly, pursuant to such Assessment, carried out during the relevant previous year, the assessee company was required to deposit the differential amount of Sales Tax on the transactions for which the requisite forms could not be submitted. Thereafter, the assessee company deposited Rs. 1,82,756 as part of the sales tax amount. 1.6. Since there was delay in deposition of the aforementioned amount of sales tax, the assessee company along with the tax, had to deposit interest, amounting to Rs. 2,71,826 on such delayed deposition of sales tax amount, in accordance with the Section 9 of Central Sales Tax Act, 1956 r.w. Section 55 of Rajasthan Value Added Tax Act, 2003. Also, Rs. 3,152 was deposited on account of interest due to delay in deposition of Custom Duty and Service Tax. 1.7. Thus, the total amount of Rs. 4,57,734 (Rs. 1,82,756 + Rs. 2,71,826 + Rs. 3,152), was claimed by the assessee company, during the relevant previous year, as part of the expenses incurred for the purpose of bus....

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....the route of concessional rate of tax was blocked for the reason of assessee company having not been able to deposit the requisite form with the Sales Tax Authorities. 4.6. It is akin to a case, if the assessee company had not collected any Sales Tax amount from the buyer, in such a scenario, assessee company would have been responsible for payment of Sales Tax out of its own pocket and would have got deduction of entire such amount under section 37(1). 4.7. Hon'ble Supreme Court in Malwa Vanaspati & Chemical Co. [1997] 92 Taxman 537 (SC) (Enclosed Page 3), with reference to Madhya Pradesh General Sales Tax Act, 1958, that, wherein, the assessee had to pay the amount of tax at actual rates and something more (up to 25% of the tax amount), instead of concessional rates, then, it comprises both the elements of compensation and penalty. Compensation insofar as payment of tax at the full rate is obligatory, and something more (i.e. up to 25 % of the tax amount), is in the character of a penalty. The assessee shall be entitled to the deduction under section 37(1) insofar as the payments partake the element of compensation, i.e. up to 100% of the sales tax ....

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....f the above factual and legal position, additions made by the AO and sustained by the ld. CIT(A) deserves to be deleted.'' 2.6 During the course of hearing, the ld. DR supported the orders of the lower authorities and also relied on the following decisions. 1. Swadeshi Cotton Mills Ltd. vs CIT 233 ITR 199 ( SC) 2. Bokaro Power Supply Co. vs DCIT , Circle 3(1), New Delhi (ITA No.3405/Del/2014 (assessee ) and ITA No.3692/Del/2014 (Revenue ) date of order 31-10-2017, ITAT Delhi Bench 2.7 We have heard the ld. counsels for both the parties and we have also perused the materials placed on record, deliberated upon judgements cited by the parties as well as the orders of the Revenue authorities. From the facts, we noticed that the assessee had made certain inter-state sales at concessional rates of Sales Tax, against ''C'' forms prescribed under the Central Sales Tax Act, 1956. The assessee company was required to collect requisite forms from the buyers of the goods situated in different States and thereafter deposit the same with the Sales Tax Authorities in the State of Rajasthan. However, for certain sales transactions, the assessee company could not obtain the ....