Allahabad H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in restoring the matter back to the file of the CIT(A) to ascertain whether the deduction was allowed to the assessee in any year in past for attracting the provisions of s. 41(1) of the IT Act, 1961 ?

High Court Of Allahabad

CIT vs. Emkay Glass Works

Section 41(1)

Asst. Year 1984-85

R.K. Agrawal & Prakash Krishna, JJ.

IT Ref. No. 101 of 1993

15th March, 2005

Counsel Appeared :

Shambhoo Chopra, for the Revenue : None, for the Assessee

ORDER

R.K. Agrawal, J. :

The Tribunal, New Delhi, has referred the following two questions of law under s. 256(2) of the IT Act, 1961 (‘the Act’) for opinion to this Court :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in restoring the matter back to the file of the CIT(A) to ascertain whether the deduction was allowed to the assessee in any year in past for attracting the provisions of s. 41(1) of the IT Act, 1961 ?

2. Whether the Hon’ble Tribunal while directing so, was correct in law, ignoring the facts that (i) taxability of refund was conceded by the assessee before the CIT(A); and (ii) the collection of excise duty of Rs. 98,607 was undisputedly a trading receipt ?”

2. The reference relates to the asst. yr. 1984-85.

3. Briefly stated, the facts giving rise to the present reference are as follows : The respondent-assessee had received a sum of Rs. 98,077 as refund of central excise duty on 24th Jan., 1983 in consequence of order of the Collector, Central Excise, dt. 27th Jan., 1981. The AO brought the said amount to tax under s. 41(1) of the Act, which order was upheld by the CIT (A). However, the Tribunal has remanded the matter to the AO to find out as to whether the amount has been allowed as a deduction in any of the years whether expressly or impliedly and if allowance or deduction has not been allowed in any year either expressly or impliedly for any reason whatsoever, the refund received by the assessee would not be assessable under s. 41 of the Act as the basic condition for attracting the provisions of s. 41 of the Act would be absent.

4. We have heard Sri Shambhoo Chopra, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee.

5. It is not in dispute that before all the authorities the respondent-assessee had been contending that no deduction in respect of the Central excise duty has been claimed or allowed by the AO and, therefore, there was no question of treating the amount of refund as income under s. 41(1) of the Act. For the applicability of s. 41(1) of the Act the pre-requisite condition is that an allowance or deduction has been made in the assessment for any of the years in respect of an expenditure, loss or trading liability incurred by the assessee and subsequently during any previous year the assessee has received or obtained the said amount. As in the present case, we find that the Tribunal has remitted the issue to the assessing authority to find out as to whether any allowance or deduction was either expressly or impliedly in any of the years the excise duty of Rs. 98,077 has been granted or not, the order of the Tribunal does not suffer from any infirmity.

6. Thus, the first question referred to us is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

7. So far as the second question is concerned, we find that even though the CIT(A) has recorded that taxability of the refund has been conceded by the respondent, yet this very point was raised before the Tribunal and the Tribunal has adjudicated upon the said issue and, therefore, it will not make any difference on the order of remand passed by the Tribunal.

So far the question of the collection of excise duty of Rs. 98,607 as trading receipt is concerned, it is settled that the excise duty forms part of the turnover and is, therefore, a trading (receipts). However, it will have no effect on the question as to whether under s. 41(1) of the Act refund should be brought to tax or not.

We accordingly answer the first part of the second question in the negative, i.e., in favour of the assessee and against the Revenue and the second part in the affirmative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.

[Citation : 288 ITR 582]

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