Adjusting tax liability against purchase input to be deemed as actual payment eligible for Sec. 43B relief: HC
Adjusting tax liability against purchase input to be deemed as actual payment eligible for Sec. 43B relief: HC
Merck Ltd. v. DCIT – [2021] 132 taxmann.com 174 (Bombay)
SHORT OVERVIEW OF THE CASE:
Assessee had claimed a certain sum being sales tax set off as deduction under section 43B of the Income-tax Act, 1961. According to the assessee, the sales tax set off represents that part of the purchase tax paid by the assessee. According to the assessee, the amount set off to be treated has been paid as a tax liability which is deductible under section 43B.
However, Assessing Officer (AO) disallowed the claim of the assessee. The assessee preferred CIT(A), which upheld the disallowance, and later ITAT also dismissed appeal of the assessee. Aggrieved-assessee filed the appeal before the Bombay High Court.
The issue before the Bombay High Court was
‘Whether the expression “actually paid by him” in Section 43B also included the amount which has been set off or adjusted?’
The Bombay High Court held that the Sales Tax Rules allowed an incentive by way of adjustment of sales tax. In other words, the assessee can set off or adjust the sales tax already paid at the time of purchase of raw materials against the sales tax collected at the time of sale of finished goods.
Law also allows the assessee to retain the sales tax amount which has been claimed as a set-off.
Since the procedure followed by the assessee is permitted and in accordance with law, therefore, set off tax liability is to be presumed to be a deemed payment.
This adjustment, by legal fiction, is deemed to be an actual payment of the tax liability and is deductible under section 43B.
Accordingly, the amount settled by assessee by way of set-off or adjustment is eligible for section 43B relief.
Remand of a case to Dispute Resolution Panel– No time limit for passing order by DRP?
Section 144C of the Income-tax Act, 1961 (‘the Act’) provides for a special and speedier assessment process for a certain class of assessees.
The section provides that in the first instance the Assessing Officer (‘AO’) shall issue a draft of the proposed order of assessment which can be challenged inter alia before the Dispute Resolution Panel (‘DRP’).
The AO later finalises the assessment by passing a final order based on directions of DRP. There have been several instances in the past wherein the final order is challenged before the Income-tax Appellate Tribunal (‘Tribunal’) alleging that the DRP’s failed to give proper directions to the AO by passing a speaking order. In such cases, the Tribunal remands back the case to the DRP for passing a speaking order.
This article deliberates on whether any time limit is prescribed in the Act for DRP to pass an order in such cases of remand and in case there is no statutory time limit, what can be the maximum time limit for passing of the order by DRP.
