Case Law Details
Thar Automobiles Pvt. Ltd. Vs ITO (ITAT Delhi)
The issue under consideration is regarding applicability of provision of section 43B on the registration fees collected from the customers on sale of the vehicles?
The assessee is a company engaged in the business of trading of Honda Two wheelers. When the vehicles are sold the assessee collects the registration fees from the buyer for registering the vehicles on behalf of buyer with Road Transport Authority. As soon as the RTO registration fees is paid on behalf of the buyer, the account is squared up . It is neither a tax , duty or other sum payable by the assessee. It merely facilitates the registration of vehicle in the buyers name.
Further, ITAT find that the above sums are not covered under any of the provisions of clause(a) to (g) of section 43B. Both are trading liabilities if those are not discharged by the assessee completely , they can be taxed as income of the assessee. In view of the above facts ITAT direct the ld AO to delete the addition and accordingly the appeal is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
1. This appeal is filed by the assessee against the order of the ld CIT(A)-9, New Delhi dated 09.11.2018 raising the following grounds of appeal:-
“1. Ld CIT(A) has erred in law in upholding the addition made u/s 43B of Rs 670742/- being the old brought forward liability from the preceding previous years 2009-10 to 2012-13 under the ledger Head “reserve and Surplus of the employees” ignoring the assessee’s submission that this was not the liability referred u/s 43B and hence liable to be set aside and quashed and declared non rest in law.
2. Ld CIT(A) has erred in law in upholding the addition made u/s 43B of Rs. 68580/- being the registration fee collected from customers for registration of sold vehicles with the Registrar of Transport Office (RTO) ignoring the assessee’s submission that this was collected as agent of the customers for registration of sold vehicles and it was not the liability referred u/s 43B and hence liable to be set aside and quashed and declared non est in law.”
2. Brief facts of the case shows that the assessee is a company engaged in the business of trading of Honda Two wheelers. It filed its return of income on 20.11.2014 at Rs. Nil. The assessment u/s 143(3) was made on 22nd December 2016 on Rs. 4476841/-. The assessee preferred an appeal before the ld CIT(A) where partial relief was given. Therefore, the assessee is in appeal before us on the issues on which additions are sustained.
3. At the time of hearing the ld counsel of the assessee requested for adjournment, as he could not prepare the matter. However, looking to the issues involved, the appeal is decided on the merits of the case as per information available on record the issues involved in these appeal are as clear as water of Ganges in favour of the assessee , hence, we reject request for adjournment.
4. The ld DR supported the orders of the lower authorities.
5. The first ground of appeal is with respect to the addition u/s 43B of the Act of Rs. 670742/-. The assessee has outstanding balance of Rs. 670742/- in account under the under the head “Reserve and surplus of the employees”. The claim of the assessee is that it is outstanding brought forward liabilities from the previous year 2009-10 and is not a liability prescribed u/s 43B of the Act.
6. The second ground of appeal is with respect to the applicability of provision of section 43B on the registration fees collected from the customers on sale of the vehicles. Claim of the assessee is that when the vehicles are sold the assessee collects the registration fees from the buyer for registering the vehicles on behalf of buyer with Road Transport Authority. As soon as the RTO registration fees is paid on behalf of the buyer, the account is squared up . It is neither a tax , duty or other sum payable by the assessee. It merely facilitates the registration of vehicle in the buyers name. Therefore, on this sum the provision of section 43B does not apply.
7. On careful analysis on reading of section 43B of the Act we find that both the above sums are not covered under any of the provisions of clause(a) to (g) of section 43B. Neither the ld AO or the ld CIT(A) could show that how these outstanding liabilities are covered u/s 43B of the Act. Both are trading liabilities if those are not discharged by the assessee completely , they can be taxed as income of the assessee. In view of the above facts we direct the ld AO to delete the addition of Rs. 670742/- on reserve and surplus of the employees account outstanding since 2009-10 and also of Rs. 68580/- being a registration fees collected from the customers. Accordingly, ground Nos. 1 and 2 of the appeal are allowed.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 20/05/2020.
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