Commissioner of Income Tax vs Hughes Escorts Communications Ltd.

The revenue is aggrieved by an order dated 30-11-2006 passed by the Income Tax Appellate Tribunal, Delhi Bench ''C in ITA No. 812/Delhi/2003 relevant for the assessment year 1999-2000.

The assessee claimed a deduction u/s 43B of the Income Tax Act, 1961 on the ground that it was required to make a Special Value Branch (SVB) deposit with the Customs authorities to the extent of Rs. 26,60,128. The assessee did not claim any such deduction before the assessing officer, but before the Commissioner (Appeals) it sought to raise an additional ground, which was allowed. It was the contention of the assessee that the additional payment is called a deposit pending final determination of the actual duty and it is an amount that is to be paid on demand to the Customs authorities. In other words, the assessee really had no option but to make the payment and that is why it claimed a deduction u/s 43B of the Act.

The Commissioner (Appeals) accepted the contention urged by the assessee and directed the assessing officer to allow a deduction of Rs. 26,60,128. It was further submitted that if the whole or any part of this amount is found to be not payable to the Customs authorities on the relevant goods, then such amount shall be brought to tax u/s 41(1)(a) of the Act in the relevant year.

Against the order passed by the Commissioner, the revenue preferred an appeal before the Tribunal which upheld the view taken by the Commissioner.

We find from a perusal of the order passed by the Tribunal that the assessee really had no option but to make the payment as per the demand notice issued by the Customs authorities. At the time of making the payment it was not known whether the demand would fall short of the actual liability or in excess of the actual liability. Taking this into consideration, the Tribunal felt that it would not be appropriate to limit the claim of the assessee only to the extent of the actual liability. It was found that there is no error in directing the assessing officer to make a verification with regard to the excess payment, if any and to tax the amount if it has not already been taxed. The Tribunal also limited the liability of the actual amount to the assessment year under consideration.

We cannot find any fault in the view taken by the Tribunal primarily because the liability was required to be discharged by the assessee on demand and the assessee had no option but to make the payment. This clearly falls within Section 43B(a) of the Act.

Learned counsel for the revenue contended that the amount deposited by the assessee is not customs duty at all. No such argument was canvassed before the Tribunal and we cannot permit learned counsel to raise such an argument at this stage.

In our opinion, no substantial question of law arises for our consideration.

Dismissed.