SLO Automobiles Private Limited Vs DCIT (ITAT Delhi)
VAT Liability Is Not Income — ITAT Deletes ₹1.24 Cr Addition Treated as Trading Receipt
The Delhi Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal and deleted the addition of ₹1,24,22,756 made on account of VAT liability, which had been wrongly treated as trading receipts.
The case arose after a survey by the Commercial Tax Department revealed suppressed sales and corresponding VAT liability. Although the assessee voluntarily disclosed the omitted sales and filed revised returns, the Assessing Officer added the entire VAT liability to income, invoking section 43B and relying on the Supreme Court decision in Chowringhee Sales Bureau Pvt. Ltd. The CIT(A) upheld the addition, treating VAT as part of turnover.
The Tribunal held that VAT collected is a statutory liability payable to the Government and does not constitute income under section 2(24), especially when it was never credited to the profit and loss account. It was further noted that the Assessing Officer had already estimated profits on revised sales and that section 43B had no application since the VAT assessment was not complete and substantial payments (₹1.20 crore) had already been made before and during the assessment proceedings.
Accordingly, the ITAT ruled that taxing VAT as income would result in double taxation and deleted the entire addition. The assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
