Oricon Enterprises Ltd Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that the waiver of differed sales tax liability is a benefit accrued to the assessee arising out of its business hence the sum waived is taxable under section 28(iv) of the Income Tax Act. Accordingly, appeal of assessee dismissed.
Facts- The only issue to be adjudicated in this case is whether the amount credited to profit and loss account on prepayment of deferred sales tax liability at Net Present Value (NPV) by invoking section 2(24)(xviii) of the I.T. Act as “income” rejecting the appellant’s claim of non-taxability of the same.
The appellant’s main argument is that the amendment to the section vide Finance Act 2015 does not in any way effect the non-taxability of the same on extinguishment of sales tax liability on prepayment at NPV and hence the action of AO treating the same as “income” and as confirmed by CIT(A) is contrary to the provisions of law i.e., the amount credited in its profit and loss account is non-taxable.
Conclusion- Held that there is a ‘benefit’ because the appellant company is paying the reduced amount to the Government as compared to the actual sales tax collected from its customers over a period of 10 years. Thus the waiver amount of Rs. 90,22,491/- comes within the ambit of section 28(iv) of the Act, to be brought under the head ‘profits and gains of business or profession’ which says that the value of benefit/perquisite/whether convertible into money or not, arising from business.
