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C.I.T. versus D.M.S.CORP

High Court of Judicature at Allahabad

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C.I.T. v. D.M.S.Corp - INCOME TAX REFERENCE No. 107 of 1992 [2005] RD-AH 474 (22 February 2005)


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Court No.37

Income Tax Reference No.107 of 1992

Commissioner of Income Tax, Lucknow vs. M/s Deepak Match Sales Corporation, Rampur.

Hon'ble R.K.Agrawal, J.

Hon'ble Prakash Krishna, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-

" Whether on the facts and in the circumstances of the case, the appellate Tribunal was justified in law confirming the orders of the CIT (Appeals) passed for the assessment years 1984-85 & 1985-86 deleting the addition made by the assessing officer u/s 43-B of the Income Tax Act, 1961?"

The present Reference relates to the Assessment Years 1984-85 and 1985-86.

Briefly stated the facts giving rise to the present Reference are as follows:

The respondent is a firm, which has been assessed to income tax during the assessment years in question in the status of a registered firm. The previous year relevant to the assessment years in question ended on 31st December, 1983 and 31st December, 1984 respectively. For the assessment years in question there was an outstanding balance of Rs. 55,635/- and 42,980/- in the sales tax account on the last day of the accounting year. The Income Tax Officer added the aforesaid amount under Section 43B of the Act on the ground that the amount representing the sales tax collected by the respondent from its customers had not been paid over to the State Government within the previous year relevant to the assessment years in question. Feeling aggrieved the respondent preferred a separate appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) has found that even if the amounts which were standing as credit balance in the sales tax account at the end of the accounting period they were realized during the month of December each year and were paid over to the State Government in the month of January in the succeeding year. He has held that as the previous year ended on 31st December of that year and liability for payment of sales tax dues so collected was in the next month the respondent having paid the amount within the specified period was entitled for deduction and no addition was called for. The order of the Commissioner of Income Tax (Appeals) has been upheld by the Tribunal.

We have heard Sri A.N.Mahajan, learned standing counsel for the Revenue and Sri Shakeel Ahmad, learned counsel for the respondent.

We find that the Apex Court in the case of Allied Motors (P) Ltd. v. Commissioner of Income Tax, (1997) 224 ITR 677, has held that the insertion of the first proviso to Section 43B of the Act which was inserted by the Finance Act of 1987 w.e.f. 1.4.1984 is retrospective in nature and, therefore, the Tribunal was justified in upholding the order of the Commissioner of Income Tax (Appeals) deleting the addition in respect of the amounts of Sales Tax collected in the month of December but paid over to the State Government in the succeeding month of January next year.

We, accordingly, answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.




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