2003 (12) TMI 13 - HC - Income Tax

Amendment in section 43B - Revenue contends that notwithstanding the absence of the words cess or fee in section 43B(a), prior to its amendment, which amendment was w.e.f. April 1, 1989, the section should be regarded as being applicable in respect of payment of cess and fees as well for the assessment year 1985-86 when that amendment was not on the statute book. The Tribunal having rejected that contention, the Revenue is in appeal. - Tribunal, in our view, was right in holding that the Revenue cannot be allowed to take advantage of the amended provision in order to increase the burden of the assessee for a prior assessment year by denying to him the benefit which had been given by the Assessing Officer, who had rightly regarded the assessee as being entitled to receive a deduction for the amount of royalty on the basis of the fact that such liability had accrued, the assessee having followed the mercantile system of accounting Revenue s appeal is dismissed

Summary

Issues: Interpretation of section 43B(a) of the Income-tax Act, 1961 prior to and after the amendment for the assessment year 1985-86.

Interpretation of Section 43B(a) Prior to Amendment:
The judgment addresses the contention of the Revenue regarding the applicability of section 43B(a) of the Income-tax Act, 1961, for the assessment year 1985-86 before its amendment. The court notes that the section, before the amendment, referred to "any sum payable by the assessee by way of tax or duty under any law for the time being in force." The court emphasizes that any ambiguity in the statute should be resolved in favor of the taxpayer. It is highlighted that even if the word "tax" could be interpreted broadly to include royalty, the subsequent amendment explicitly included cess or fees, indicating that the legislature recognized the need for clarification post-amendment.

Effect of Amendment on Section 43B(a):
The judgment discusses the impact of the amendment on section 43B(a) of the Income-tax Act, 1961. Post-amendment, the provision expanded to include "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." The court emphasizes that the amendment clarified the scope of payments covered under the section, specifically mentioning cess or fees. This clarification indicates that prior to the amendment, payments such as royalty were not automatically encompassed under the unamended provision.

Assessment of Tribunal's Decision:
The judgment evaluates the Tribunal's decision, which rejected the Revenue's argument regarding the applicability of the amended provision to increase the burden on the assessee for a prior assessment year. The court agrees with the Tribunal, stating that the Revenue cannot leverage the amended provision to impose additional burdens on the assessee retrospectively. It is noted that the Assessing Officer correctly allowed the assessee a deduction for royalty based on the accrual of liability under the mercantile system of accounting. Ultimately, the court dismisses the appeal, affirming the Tribunal's decision.

In conclusion, the judgment provides a detailed analysis of the interpretation of section 43B(a) of the Income-tax Act, 1961, both before and after the relevant amendment for the assessment year 1985-86. It underscores the importance of resolving statutory ambiguities in favor of the taxpayer and highlights the significance of legislative amendments in clarifying the scope of payments covered under the law. The decision reaffirms the principle of not retroactively increasing the burden on the assessee based on subsequent amendments, thereby upholding the Tribunal's ruling in favor of the taxpayer.