Judgment:
1. The assessee is a Government of India undertaking, established in the year 1964 under a special promulgation for distribution of foodgrains collected from surplus States to deficient States. In the present appeal, the corporation is aggrieved by the application of Section 43B to it, regarding the collections made by it under the sales tax. The basic claim of the appellant is that, since, it is not a dealer in the sense of the term, the provisions of the Sales Tax Acts do not apply to .it. Dr. Narayanan submitted that, the Punjab & Haryana High Court in the case of the assessee in Food Corpn. of India v. State of Haryana [1987] 66 STC 7, has very clearly held that, the corporation is not a dealer and that, the provisions of the Sales Tax Act do not apply to it. While coming to this conclusion, Dr. Narayanan submitted that, the High Court had found as a fact that, the corporation has no say in either in the purchase price or in the sale price of the foodgrains, because, it was fixed by the Central Government. He pleaded that, the court could come to this conclusion by appreciating the promulgation under which the corporation came to be founded. The purpose or the object of the corporation is to procure foodgrains from the surplus States and distribute them to the deficient States, at the price as dictated or fixed by the Central Government. Therefore, there being total absence of any freedom as is normally available to a trader, the provisions of the Sales Tax Acts do not apply to it. He contended that, the sales tax that is being sought to be added is related to the corporation's activity of collection and distribution of wheat. He submitted that, the procurement and distribution of wheat as per orders of the Government is on similar lines as was examined and evaluated by the Punjab & Haryana High Court on the levy of rice. He pleaded that, the provisions of Sales Tax Act apply to a trader or dealer, who has the freedom to deal in such goods and at such places, as the dealer pleases. He contended that, when such freedom does not exist, the appellant could not be held to be liable for any sales tax.
He contended that, when the amounts collected do not bear the character of the sales tax, then such sum could not be added back by invoking the provisions of Section 43B. He contended that, Section 43B would be attracted only if the amount bears the character of a tax. He contended that, whether an amount is a tax or duty is primarily the concern of that Act. He pleaded that, if an amount could not be treated as a tax or duty under those Acts, then, for purposes of Income-tax Act too, they shall not bear the character of tax or duty. The consequence he submitted that, the said amounts could not get attracted by the provisions of Section 43B of the Income-tax Act. He emphasised on the proposition that, when the corporation is not covered by the provisions of any Sales Tax Acts, then, it could not be held as liable under those laws and consequently, it could not be held as claiming deduction in respect of the tax without actually paying for the same in the accounting year. He strongly contended that, the disallowance as was made of Rs. 419.16 lakhs by applying Section 43B in these circumstances, is wholly improper. Dr. Narayanan submitted that, for the asst. year 1985-86, identical issue was raised by the appellant and the Tribunal had held the issue against it and that, a rectification application has already been moved. He contended that, the Tribunal had proceeded without adjudicating on the fundamental claim of the assessee that, it is not a profit making enterprise, it had no freedom to decide about the price of purchase & sale and the place of sale. His plea was, that, the High Court had categorically held that, the assessee is not a dealer and, therefore, the Sales Tax Acts do not apply to it. He pleaded that, when a particular Act does not apply to it, then, the assessee could not be held responsible for not depositing of the amounts within the accounting year. He contended that, since the amount of Rs. 419.16 lakhs is not a liability payable under the Sales Tax Act, the said amount cannot be disallowed under Section 43B of the IT Act, for the reason of it not being deposited within the accounting year.
2. Shri Ramesh, the departmental representative placed heavy reliance on the orders of the authorities and on the order of the Tribunal for the asst. year 1985-86. He contended that, since the appellant has collected the amounts by way of sales tax, and the same having not been paid within the accounting year, it has been rightly added back or disallowed under Section 43B of the Income-tax Act.
3. We have given our very careful consideration to the rival submissions. The ruling of the Punjab & Haryana High Court in the case of the assessee (supra) and the order of the Tribunal for asst. year 1985-86 in the case of the assessee has been perused very carefully.
The order of the Government on the Price & Procurement Policy of wheat Dt. 7th & 19th April, 1983, and the issue price of wheat dated 12th Feb. & 7th April, 1983 and the State-wise allotment of wheat and rice dated 8th Mar., 14th April, 10th May & 6th June, 1983 have also been perused.
4. The Punjab & Haryana High Court in the case of the assessee had made note of the fact that, the appellant was a registered dealer under Central Sales Tax Act and the Haryana General Sales Tax Act. It had also noted the fact that, the appellant was procuring rice, paddy and other foodgrains in the surplus States through the aegis of the State Government and its officers and distributes the foodgrains so procured to the deficit States. There, the Haryana State Government, in pursuance of the instructions of the Central Government promulgated the Haryana Rice Procurement Price Control Order, 1968 and the Haryana Rice Procurement (Levy) Order, 1979. The procurement price of rice was fixed under those orders. The different officers of the State of Haryana procured the rice for the appellant with the funds provided by the Director of Food & Supplies Department, Haryana. The rice so procured was delivered to the central pool under the supervision of the corporation. The Court then considered the amendment to Schedule D of the Haryana General Sales Tax Act, by a notification dated Nov. 30, 1982. By means of this notification, it was provided that, if the grains were purchased by the Food Corporation from within the State, directly or through any other dealer liable to pay tax under the Act, then the levy of sales tax shall be at the stage of purchase by Food Corporation in the State. The Court was considering the writ petition of the appellant challenging the amendment in the light of the above-mentioned facts, as also to the ratio laid down by the same court in the case of the appellant itself in Food Corpn. of India v. State of Punjab [1976] 38 STC 144. The Court also considered the ratio laid down by the Supreme Court in Chittar Mal Narain Das v. CST[1970] 26 STC 344.
The Court observed that, Supreme Court had examined the U.P. Wheat Procurement (Levy) Order, 1959, with special reference to clause 3 of the order. This clause provided that, every dealer in the State shall sell to the State at the controlled prices 50 per cent of the stocks held by him at the commencement of the year and that procured by him during the year, directing that, the wheat so procured by the dealer shall be delivered to the State Government. The question that was considered by the Apex Court was, whether, such transaction pursuant to the orders of the State even by a dealer could be treated as a contract of sale. The Apex Court ruled that, such compulsory transactions, in which, the dealer had no freedom at all, could not be termed as arising out of a contract for sale. The Court observed that, compulsory acquisition with freedom to bargain in some areas, would amount to a sale which is being derived from the ratio of the Apex Court in Vishnu Agencies (P.) Ltd. v. CTO[1978142STC31.The Court ruled that, where the person has no freedom either to decide the purchase price or the sale price, as also the place of sale, he cannot be designated as a dealer within the meaning of the Haryana General Sales Tax Act. The Court held that, Food Corporation which has procured the rice according to the promulgation of the Government's order, at the price fixed by the Government and distributed it to the States according to the notification issued by the Government, which clearly showed that, Food Corporation had no freedom regarding procurement or distribution or the price of procurement & distribution, as is normally enjoyed by a dealer, and combined with the total absence of any profit motive at any stage, it cannot be a dealer and, therefore, the provisions of the Sales Tax Act do not apply to it.
5. The provisions of the Income-tax Act would apply to a person, who could be termed to be an assessee, within the meaning of that term, as defined by that Act. This would be in as far as it is concerned with the income earned by that person. Whether that person is governed by the provisions of any other Act or not, is primarily an issue to be considered and examined in the light of the provisions of that Act.
This is so since, Income-tax Act is not a composite Statute, but, a law governing the income earned by a person. It defines the broad perspective of 'income from business or profession'. The business of a person may be governed by the provisions of the various laws, which would get attracted by his various dealings/ transactions etc. A trader, dealing in purchase and sale, would be governed by the provisions of the Sales Tax Act. A manufacturer would be attracted by the provisions of Excise Laws. If in a case, the Sales Tax Act exempts a trader from the provisions of the Sales-tax regarding certain items, or the Courts have ruled that, provisions of the Sales-tax do not apply to that person in respect of certain items, then for the purposes of Income-tax Act, as well, for those items, the assessee could not beheld as attracting the provisions of Section 43B. This is so obvious, because, the liability to pay tax as envisaged must primarily arise under that Act and it is only then, it can be examined whether, the assessee is claiming deduction of any liability toward tax, which he has not paid within the accounting year. The plain reading of the Section 43B clearly suggest this aspect.
Notwithstanding anything contained in any other provisions of this Act, a deduction otherwise allowable under this Act in respect of - (a) Any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, shall beallowed(...)only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him.
6. The reading of the above provisions suggests that, if an amount collected by an assessee, is not payable as tax or duty under any law, then, this section could not be invoked. In the appellant's own case, the Punjab & Haryana High Court, by applying the ratio laid down by the Supreme Court in Chittar Mal Narain Das's case (supra), had held that, the assessee is not a dealer within the meaning of the-Sales Tax Act and is therefore not liable for any sales tax. The facts in the instant case is that, the assessee is directed to procure wheat for the year 1983-84 under the Price and Procurement Policy announced by the Ministry of Food and Civil Supplies. They have fixed the procurement price of wheat at Rs. 151 per quintal for grade one quality, for grade two quality Rs. 149 per quintal and it has also directed that, wheat below grade two should not be procured. Similarly, they have also directed the price at which supply shall be made to the Flour Mills.
The price was revised upward to Rs. 160 per quintal. This was followed by the allotment of the foodgrains to the various States, which was revised a few times in the year 1983-84. The price at which the distribution was to be effected was also fixed by the Government. The above feature clearly reveals that, the appellant is mere procurer for the Government, of the type of foodgrain, at the price dictated by it, and is a distributor to the various States according to the quota or quantity fixed by the Government and this distribution price too is decided by the Government. The appellant at no point has no freedom as is available to a dealer, and is therefore, merely functions as an agency for the Government, which is, the sole purpose of inaction of the promulgation of the Food Corporation of India Act, 1964. Therefore, since, this agency of the Government having only acted on the directions of the Government, it could not be said that it had acted with any profit motive. The element of profit motive would arise when there is freedom attached to the transactions. The dealer who has total freedom of dealing in any type of goods, freedom to deal in it in any State, would so deal in goods solely from the point of view of making profit in such dealing and would not dabble in those goods, if he were not to make any profit. The assessee has acted for the Government in procuring and distributing the foodgrains, at the price allowed to be procured and sold, and the difference in the price of procurement is so fixed for sustaining of the Corporation and to meet the Corporation's expenses in carrying out the Government's directives. Therefore, as per ratio laid down by Punjab & Haryana High Court in the appellant's case (supra) we have to hold that, the assessee corporation is not a dealer, and is not attracted by the provisions of the Sales Tax Act. Therefore, it cannot be held as liable under the Sales Tax Act, and consequently, it cannot be treated as claiming deduction of any tax or duty payable under any law in force. When an assessee is not claiming any deduction of any amount, which amount is not a liability due to any tax or duty under any law in force, the said amount could not be treated as a tax or duty, merely because, it has been so termed and collected by the assessee. Unless, the amount so collected bears the character of tax or liability, and that amount has to be paid as such, under a particular law, the said amount could not be termed as tax or duty. In the instant case, the amount no doubt is collected as sales tax, but, since, the assessee is not a dealer and has no liability towards any Sales Tax Act, the assessee could not be said to be claiming deduction in respect of any tax or duty, which amount is payable under that Act. Therefore, the fundamental aspect of there being any liability towards any Act being absent, the assessee could not be said to be claiming any deduction under those Acts. When, the assessee could not be said to be claiming any deduction of any item which is not a liability as tax or duty under any law, Section 43B could not be brought in or invoked, and no addition therefore be made. We, therefore, delete addition of an amount of Rs. 419.16 lakhs made under Section 43B of the Income-tax Act.
7. While coming to this conclusion, we are conscious of the decision of the Tribunal in the assessee's case for the asst. year 1985-86, copy of which had been filed before us. Considering the decision of the Punjab & Haryana High Court in the appellant's own case, which by placing reliance on the Supreme Court's ratio in Chittar Mai Narain Das's case (supra ) has opined that, the assessee with no freedom of a dealer and, therefore, cannot be termed a dealer and therefore is not liable under the Sales Tax Act, we were left with no alternative but to apply the above ratio.