CIT vs. Sulzer India Limited (Bombay High Court) Order dated 5.12.2014
The High Court had to consider whether the
judgement of the Special Bench of the Tribunal in Sulzer India Ltd vs. JCIT 138
ITD 1 (SB)(Mum) that the difference between the Net Present Value of sales-tax
liability and its future liability is not chargeable to tax u/s 41(1) is
correct or not. HELD by the High Court affirming the judgement of the Special
Bench:
Premature payment of Sales Tax already
collected but not remitted to the Government is not covered by S. 43B. because
otherwise the provision would have been worded accordingly. The applicability
of s. 41(1)(a) has to be considered in the light of whether the liability is a
loss, expenditure or trading liability. In this case, the scheme under which
the Sales Tax liability was deferred enables the Assessee to remit the Sales
Tax collected from the customers or consumers to the Government not immediately
but as agreed after 7 to 12 years. If the amount is not to be immediately paid
to the Government upon collection but can be remitted later on in terms of the
Scheme, then, we are of the opinion that the exercise undertaken by the
Government of Maharashtra in terms of the amendment made to the Bombay Sales
Tax Act and noted above, may relieve the Assessee of his obligation, but that
is not by way of obtaining remission. The worth of the amount which has to be
remitted after 7 to 12 years has been determined prematurely. That has been
done by finding out its NPV. If that is the value of the money that the State
Government would be entitled to receive after the end of 7 to 12 years, then,
we do not see how ingredients of sub section (1) of section 41 can be said to
be fulfilled. The obligation to remit to the Government the Sales Tax amount
already recovered and collected from the customers is in no way wiped out or
diluted. The obligation remains. All that has happened is an option is given to
the Assessee to approach the SICOM and request it to consider the application
of the Assessee of premature payment and discharge of the liability by finding
out its NPV. If that was a permissible exercise and in terms of the settled
law, then, we do not see how the Assessee can be said to have been benefited
and as claimed by the Revenue. The argument of Mr. Gupta is not that the
Assessee having paid Rs.3.37 crores has obtained for himself anything in terms
of section 41(1), but the Assessee is deemed to have received the sum of
Rs.4.14 crores, which is the difference between the original amount to be
remitted with the payment made. Mr. Gupta terms this as deemed payment and by
the State to the Assessee. We are unable to agree with him. The Tribunal has
found that the first requirement of section 41(1) is that the allowance or deduction
is made in respect of the loss, expenditure or a trading liability incurred by
the Assessee and the other requirement is the Assessee has subsequently
obtained any amount in respect of such loss and expenditure or obtained a
benefit in respect of such trading liability by way of a remission or cessation
thereof. As rightly noted by the Tribunal, the Sales Tax collected by the
Assessee during the relevant year amounting to Rs.7,52,01,378/was treated by
the State Government as loan liability payable after 12 years in 6 annual/equal
installments. Subsequently and pursuant to the amendment made to the 4th
proviso to section 38 of the Bombay Sales Tax Act, 1959, the Assessee accepted
the offer of SICOM, the implementing agency of the State Government, paid an
amount of Rs.3,37,13,393 to SICOM, which, according to the Assessee,
represented the NPV of the future sum as determined and prescribed by the
SICOM. In other words, what the Assessee was required to pay after 12 years in
6 equal instalments was paid by the Assessee prematurely in terms of the NPV of
the same. That the State may have received a higher sum after the period of 12
years and in installments. However, the statutory arrangement and vide section
38, 4th proviso does not amount to remission or cessation of the Assessee’s
liability assuming the same to be a trading one. Rather that obtains a payment
to the State prematurely and in terms of the correct value of the debt due to
it. There is no evidence to show that there has been any remission or cessation
of the liability by the State Government. We agree with the Tribunal that one
of the requirement of section 41(1)(a) has not been fulfilled in the facts of
the present case (CIT vs. McDowell (Kar)
referred).
Related Judgements
The second requirement of s. 41(1) is also not satisfied because in paying the NPV of the sales-tax liability, the assessee has paid the equivalent of the Future Value of the sum. As the sum of Rs. 3,37,13,393 is the NPV of the future sum of Rs.7,52,01,378 and its…
As per an incentive scheme announced by the Government of Maharashtra, the assessee entered into an agreement to avail the benefits under deferral/1993 scheme which provides for deferment of payment of taxes. This agreement not only determined the eligibility of the assessee but also laid down the terms and…
(i) The contention of revenue is that no interest at all is payable to the petitioner under Section 244A(1)(a) and (b) of the Act unless the amounts have been paid as tax. It would not cover cases where the payment is gratuitous as is evident from the fact that…
Article Submitted by:
Mr. K.K. Juneja
Advocate
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