RAM SURAT RAM (MAURYA),J. - (1.) AT the instance of the Commissioner of Income Tax, (Central) Kanpur, the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter referred to as the Tribunal) has referred the following questions, for opinion to this Court, under Section 256 of the Income Tax Act, 1961 (hereinafter referred to as the Act): - "Whether on the facts and circumstances of the case, the ITAT was justified in directing the A.O. to work out the disallowance u/s 43B, on account of outstanding luxury tax liability, on the basis of actual realisation of the luxury tax and not on the basis of unrealised luxury tax although the assessee was maintaining its accounts under mercantile system."
(2.) THE facts giving -rise to this reference are that M/S U.P. Hotels Pvt. Limited, 10/252, Maqbool Alam Road, Varanasi (the respondent) is a public limited company, and engaged in the hotel business. The respondent owned (i) Hotel Clarks Shiraz, Agra, (ii) Hotel Clarks Avadh, Lucknow and (iii) Hotel Clarks Amer, Jaipur. In the present reference, the question relates to addition of the amount of "luxury tax" payable by the respondent for the Assessment Years 1987 -88 and 1988 -89 under U.P. Taxation and Land Revenue laws Act, 1975 as such facts in relation to luxury tax alone are noticed in the judgment. The respondent filed it's income tax return for the Assessment Year 1987 -88 on 26.06.1987 showing profit of Rs. 64,20,868/ - This profit was adjusted against unabsorbed carried forward loss and depreciation of Rs. 1,00,32,618/ - Thus total loss of Rs. 36,11,750/ - was shown. The Assessing Officer, on scrutiny of balance sheet, noticed that luxury tax of Rs. 5,24,980/ - was payable on the total gross income at the rate 7%. There was no luxury tax at Jaipur, while outstanding luxury tax of Agra Unit was worked out to Rs. 4,31,759/ - and Lucknow Unit was worked out to Rs. 93,221/ - total Rs. 5,24,980/ -. The Assessing Officer required the respondent to explain as to why this amount be not added in the gross income of the respondent. The respondent stated that luxury tax was not actually collected by the respondent as such there was no receipt of this amount, so as to form it's income. The Assessing Officer, by order dated 28.03.1990, held that luxury tax was payable by the respondent under the law and as no actual payment of luxury tax was made as such this amount was liable to added in the income of the respondent under Section 43B of the Act. The respondent filed an appeal (registered as Appeal No. 32/CC -I/VNS/1990 -91) from the aforesaid order. The appeal was heard by the Commissioner of Income -tax (Appeals) II, Varanasi who by order dated 20.08.1990 found that total payment of luxury tax during the year exceeded total collection of the luxury tax. The amount which was not collected cannot be treated as income of the respondent and no addition can be made in this head. On these findings the appeal was allowed in part and the addition made in this head was deleted.
(3.) THE respondent filed its income tax return for the Assessment Year 1988 -89 on 28.06.1988 showing income of Rs. 17,30,187/ - This income was adjusted against unabsorbed carried forward loss and depreciation. The Assessing Officer on scrutiny of balance sheet, noticed that luxury tax of Rs. 6,85,057/ - was payable on the total gross income at the rate 7%. Similarly credit balance of Rs.1,95,295/ - was payable by Lucknow Unit and there was debit of luxury tax of Rs. 2,28,426/ - Thus total credit balance of Rs. 6,51,926/ - is payable on the account of luxury tax. The Assessing Officer required the respondent to explain as to why this amount be not added in the gross income of the respondent. The respondent stated that luxury tax was not actually collected by the respondent as such there was no receipt of this amount, so as to form his income and has not been debited in Profit and Loss of the account. The Assessing Officer by order dated 20.03.1991 held that luxury tax was part and parcel of total receipt which should have been credited along with the hotel receipt. Since responsibility to pay luxury tax was on the respondent under the law and as no actual payment was made in this head as such this amount was liable to added in the income of the respondent under Section 43B of the Act. The respondent filed an appeal (registered as Appeal No. 52/CC -I/VNS/1991 -92) from the aforesaid order. The appeal was heard by the Commissioner of Income -tax (Appeals), Varanasi, who by order dated 24.08.1992, relying upon his previous year order, allowed the appeal and deleted the additions made in this head.;