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Commissioner of Income-tax Vs. Taj Gas Service - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 82 of 1978
Judge
Reported in(1980)17CTR(All)91; [1980]122ITR1034(All)
ActsIncome Tax Act, 1961 - Sections 41(1)
AppellantCommissioner of Income-tax
RespondentTaj Gas Service
Appellant AdvocateR.K. Gulati and ;A. Gupta, Advs.
Respondent AdvocateNone
Excerpt:
- - the appeal filed by the assessee succeeded and the revenue's appeal filed before the tribunal failed. this being so, the requirements of section 41(1) are satisfied inasmuch as the assessee, after incurring the expenditure in payment of sales tax, had received refund of this expenditure......runs as under :'41. (1) where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not.'4. in.....
Judgment:

C.S.P. Singh, J.

1. The Income-tax Appellate Tribunal has referred the following question of law for opinion of this court:

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that Section 41(1) of the Income-tax Act, 1961, is not attracted to this case ?'

2. The facts necessary for answering this question may be shortly stated. The assessee had paid certain amounts of sales tax in discharge of sales tax liability for the years 1970-71 and 1971-72. The assessee claimed these amounts as deductions in its income which were allowed. The assessee, in the meantime, has filed appeals to Judge Appeals, Sales Tax, and, as a result of the latter's order, the assessee received refunds amounting to Rs. 11,509 and Rs. 18,188 with respect to assessment years 1974-75 and 1975-76, respectively. These amounts were credited by the assessee to 'sales tax refund account'. The sales tax dept, however, did not acquiesce to this order and filed a revision before the Judge Revisions, Sales Tax, Agra. The matter remained pending when the question arose as to whether theseamounts should be treated as the assessee's income in view of Section 41(1) of the Act. The ITO included the amounts refunded in the income of the assessee in the respective years. The appeal filed by the assessee succeeded and the revenue's appeal filed before the Tribunal failed.

3. The question that arises is as to whether this amount constituted the assessee's income in view of Section 41(1) of the Act. Section 41(1) of the Act runs as under :

'41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not.'

4. In the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT : [1971]82ITR363(SC) , the Supreme Court held that sales tax is a business expenditure allowable under Section 37 of the Act. Thus, the amounts which the assessee had, either debited in its books or paid for sales tax, constituted business expenditure. The assessee had been granted a deduction for this expenditure. Section 41(1) provides for inclusion of any amount which has been allowed as a deductible expenditure, in case the assessee had during the previous year received in cash or in any manner whatsoever, any amount in respect of such expenditure. The assessee had obtained a refund of an amount of Rs. 11,509 and Rs. 18,188, respectively, for the assessment years 1974-75 and 1975-76 in respect of the expenditures incurred by it for payment of sales tax. He had also got a deduction in respect of this amount in the earlier year. This being so, the requirements of Section 41(1) are satisfied inasmuch as the assessee, after incurring the expenditure in payment of sales tax, had received refund of this expenditure.

5. We, accordingly, answer the question in the negative, in favour of the department and against the assessee. In the circumstances of the case, there will be no order as to costs.


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