Sunil Kumar Yadav, Judicial Member. - These appeals are preferred by the assessee against the Order of the CIT(A) on various common grounds. We, however, for the sake of reference extract grounds in ITA No. 7098/Mum./2005.

"1.The Commissioner of Income Tax (Appeals)-XXXII, Mumbai [‘the CIT(A)’] erred in confirming the action of the Assistant Commissioner of Income Tax, Range 3 (3), Mumbai (‘the ACIT’) in making addition of Rs. 1,29,25,558 being premature repayment of sales tax loan by treating as income under section 41(1) of the Income-tax Act, 1961 (‘the Act’).

2.The CIT(A) erred in treating discounting of interest free loan as discounting of deferral sales tax liability and as such erred in upholding the action of the ACIT by treating as benefit obtained by the appellant by way of discounting under section 41(1) of the Act.

3.The appellant prays that it be held that sales tax deferral was in the form of a loan and as such was not a trading receipt liable to be taxed under section 41(1) of the Act.

4.Without prejudice to the above, the appellant prays that it be held that no benefit had accrued to it on account of remission in the sales tax deferral liability."

2. Though the assessee has raised various grounds of appeal, but, they all relate to an issue whether the benefit accrued to the assessee on account of premature payment of sales tax loan is chargeable to tax as a revenue receipt under section 41(1) of the Income-tax Act.

3. The facts in nut shell borne out from the record are that the assessee is a company and has set up its unit at District Raigad which is notified backward area, thus has become eligible for incentives as per schemes announced by the Government of Maharashtra in 1993. The incentives were in the form of deferment of payment of sales tax in terms of package scheme of incentives 1993 of the Government of Maharashtra. In terms of this scheme, the sales tax liability of the assessee up to the end of the relevant previous year aggregating to Rs. 1,79,68,846 was required to be paid in 5 equal instalments from April 2010. M/s. SICON Limited (in short ‘SICON’) was appointed by the Government of Maharashtra as imple- menting agencies for the proper implementation of the incentives schemes. M/s. SICON offered the assessee in the current year relevant to the impugned assessment year premature payment option, whereby the deferred sales tax liability under the aforesaid scheme of sales tax deferrals, would be settled by an immediate one time payment of Rs. 50,49,288. This amount being the present value of future sales tax deferral payment of Rs. 1,79,68,846. The assessee accepted the offer and accordingly it had recorded in its balance sheet the amount payable to M/s. SICON Ltd. at Rs. 50,44,288 and the difference of Rs. 1,29,24,558 was credited to the capital account by treating the same as capital receipt.

4. During the course of assessment proceedings, the assessee claimed that liability on account of deferral sales tax payment is an unsecured loan and any benefit arising on the settlement of the same by making payment of its present value is not chargeable to tax being in the nature of capital receipt. It was also claimed that assessee had not obtained any benefit from SICON because it has paid only the present value of the total deferral sales tax payment. It was further claimed that sales tax collected from customers is accounted for in a separate account and is not credited to in the P & L account. It was, therefore, claimed that provisions of section 41(1) of the Income-tax Act is not applicable. The assessee placed a reliance upon the Judgment of the Punjab & Haryana High Court in the case of CIT v. Kharaiti Lal & Co. [1989] 178 ITR 265¹ and CIT v. Nathuabhai Desabhai [1981] 130 ITR 238². It was also contended that there was a dispute between the sales tax department and SICON regarding the payment of sales tax amount and there is a possibility that sales tax department would not treat this sales tax lia