Surplus/Savings arising on prepayment of deferred sales tax not taxable u/s (iv)

Brief of the case:

The ITAT Mumbai in the above cited case held that the surplus/savings  arising on prepayment of deferred cannot be taxed u/s 28(iv) as by making prepayment of a future liabity  at present value no monetary benefit arises to assessee  as the savings it made by prepayment would get set off against the interest it loses by making prepayment.

Facts of the case:

• The assessee company is engaged in the business of manufacturing of abrasives & refractory products and also dealt in ceramics and plastics. AO observed that the assessee company had made some gain on savings made by pre-payment of deferred sales tax  at Net Present Value (of the tax payable after 7 years) amounting to Rs.1,63,03,435/- which the assessee treated as capital receipt .However, AO sough the same to be taxed as remission of a trading liability u/s 41(1).
• CIT(A) accepted the assessee’s contention that savings due to prepayment of deferred sales tax would not amount to remission as envisaged in sec 41(1). However, as per CIT(A) the same results in benefit from business of the assessee as contemplated in sec 28(iv), therefore, such savings taxable as business income in Sec 28(iv).
• Aggrieved assessee is in appeal before ITAT.
  

Contention of the Assessee: