High Court Of Delhi
CIT vs. Delhi Automobiles
Sections 37(1), 41(1)
Asst. Year 1975-76
B.C. Patel, C.J. & Badar Durrez Ahmed, J.
IT Ref. No. 306 of 1983
20th May, 2004
Counsel Appeared
Sanjeev Khanna with S.C. Sharma, for the Appellant : Sanjeev Sabharwal with Rajiv Awasthi, for the Respondent
JUDGMENT
By the court :
This reference is at the instance of the Revenue for the asst. yr. 1975-76 and the following two questions have been referred which are as under :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 3,500 paid by the assessee as penalty for late payment of sales-tax was an allowable deduction ?
2. On the facts and in the circumstances of the case, the Tribunal was not right in holding that the sum of Rs. 13,170 being the unclaimed balances written off by the assessee was not taxable ?”
2. So far as the first question is concerned, on examination of the facts, the Tribunal has recorded that the amount was not paid by the assessee as penalty for late payment of sales-tax but it was by way of interest. And if that be so, the answer is required to be given in favour of the assessee and against the Revenue. So far as the second question is concerned, the Tribunal, relying upon the decision reported as J.K. Chemicals Ltd. vs. CIT (1966) 62 ITR 34 (Bom), decided the issue in favour of the assessee. The said decision of the Bombay High Court was examined by the Supreme Court in the case of CIT vs. Sugauli Sugar Works (P) Ltd. (1999) 152 CTR (SC) 46 : (1999) 236 ITR 518 (SC). The Supreme Court has pointed out as under : “There is another judgment of the Bombay High Court which was rendered much earlier in J.K. Chemicals Ltd. vs. CIT (1966) 62 ITR 34 (Bom). The Bench observed : ‘The transfer of an entry is a unilateral act of the assessee, who is a debtor to its employees. We fail to see how a debtor, by his own unilateral act, can bring about the cessation or remission of his liability. Remission has to be granted by the creditor. It is not in dispute, and it indeed cannot be disputed, that it is not a case of remission of liability. Similarly, a unilateral act on the part of the debtor cannot bring about a cession of his liability. The cessation of the liability may occur either by reason of the operation of law, i.e., on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor, or a contract between the parties, or by discharge of the debt—the debtor making payment thereof to his creditor. Transfer of an entry is neither an agreement between the parties nor payment of the liability.’ This judgment has been quoted by the High Court in the present case and followed. We have no hesitation to say that the reasoning is correct and we agree with the same.”
3. In view of the said decision of the Supreme Court, the second question is also required to be answered in favour of the assessee and against the Revenue.
[Citation : 272 ITR 381]
