Vidhya Punera, Uttrakhand vs Assessee

This appeal by the assessee is directed against the order passed by

the CIT(A) on 22.8.2013 in relation to the assessment year 2010-11. ITA No.5797/Del/2013

2. The only issue raised by the assessee in its appeal is against the

confirmation of addition of Rs.2,31,120/- made by the AO by means of

disallowance u/s 43B of the Income-tax Act, 1961 (hereinafter also

called `the Act') in respect of VAT payable.

3. Briefly stated, the facts of the case are that the assessee showed

VAT payable at the year-end amounting to Rs.2,95,719/-. The AO

observed that VAT payable amounting to Rs.64,599/- (Rs.20,185/- and

Rs.44,414) was paid by the assessee up to 15.10.2010, being the due

date u/s 139(1) of the Act for filing the income-tax return for this year.

As regards the remaining amount, the AO observed that the same was

deposited after the due date. On being called upon to explain as to why

the amount paid after the due date be not disallowed, the assessee

contended that no deduction was claimed in the Profit & Loss Account

in respect of VAT expense and, hence, there was no point in making any

disallowance. Relying on some cases, the AO held that not debiting the

amount of VAT in the Profit & Loss Account could be no bar for

deduction and consequential disallowance, in case of non-payment.

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That is how, the AO made disallowance u/s 43B to the tune of

Rs.2,31,120/-. The ld. CIT(A) came to hold that the VAT was to be

treated as part of business receipt and its deduction was to be allowed,

subject to the prescription of section 43B. He, therefore, upheld the

view taken by the AO, but, with a direction to treat VAT as part of

receipts and allow only that amount as deduction which has been paid as

per section 43B of the Act.

4. We have heard the rival submissions and perused the relevant

material on record. It can be seen from the grounds of the appeal, that

the assessee has only assailed the question of disallowance u/s 43B and

not the finding of the ld. CIT(A) to treat the amount of VAT as income

at the first instance. Thus, to this extent, the impugned order has attained

finality. The crux of the view canvassed by the ld. CIT(A) is that the

assessee will suffer disallowance u/s 43B, if the amount of VAT is not

paid before the due date. There can be no dispute on the proposition that

the amount of sales-tax or VAT is to be considered as part of trading

receipts and is exigible to tax. This view has been taken by the Hon'ble

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Supreme Court in several decisions including Chowringhee Sales

Bureau Ltd. Vs. CIT (1973) 87 ITR 542 (SC) and Sinclair Murray and

Co. Pvt. Ltd. Vs. CIT (1974) 97 ITR 615 (SC). Similarly, with the

inclusion of the amount of taxes connected with the sales in the sale

price, the assessee is eligible for deduction in respect of taxes so

included in the sales. However, section 43B provides that such taxes

can be allowed as deduction only if these are paid to the exchequer

before the due date of filing of return u/s 139(1) of the Act. Thus, it is

impermissible to neither include the amount of sales-tax or VAT etc. in

the sale price and also not claim deduction for such taxes. On the

contrary, the amount of such taxes is includible in the sale price and is

liable to be treated as income and, thereafter, deduction is permissible in

respect of such amount of taxes on payment.

5. Adverting to the facts of the instant case, we find that the assessee

neither included the amount of VAT in its sale price nor claimed

deduction on actual payment, which is a forbidden course of action. As,

admittedly, the assessee did not deposit the sum of Rs.2,31,120/- before

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the due date as per section 139(1) of the Act, the same cannot be allowed

as deduction in the computation of total income for the year under

consideration. However, such amount would qualify for deduction in

the year of actual payment. The AO is directed to make disallowance

for the unpaid amount of VAT in the computation of total income for the

instant year and also, simultaneously, allow deduction in the

computation of total income for the year(s) in which such VAT is

actually paid.

6. Before parting with this appeal, we would like to deal with the

contention of the ld. AR that the same ld. CIT(A), in another case of Sh.

Deepak Kumar Oli, Prop, M/s Deepak Agency, Lohaghat, vide his order

dated 9.9.2014, has ordered for the deletion of disallowance under

similar circumstances and hence the same view be taken here also. We

are not convinced with the submission advanced on behalf of the

assessee in this regard. What is relevant for our purpose is the

applicability of the correct position of law and not what a lower

authority has wrongly held in another case. If the ld. CIT(A) has decided

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similar issue wrongly in favour of some other assessee, then it is for the

Revenue to prefer appeal against such order before the tribunal. In no

case, such an order can have a precedent value.

7. In the result, the appeal is dismissed.

The order pronounced in the open court on 03.03.2015.

Sd/- Sd/- [I.C. SUDHIR] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated, 03rd March, 2015. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT

AR, ITAT, NEW DELHI.

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