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Issues Involved:
The issues involved in this judgment are the interpretation and application of section 43B of the Income-tax Act, 1961 to the assessment year 1984-85, specifically regarding the applicability of the first proviso to section 43B introduced by the Finance Act, 1987, and the treatment of various disallowed amounts under section 43B. Interpretation of Section 43B - First Proviso Applicability: The High Court of Calcutta addressed whether the first proviso to section 43B of the Income-tax Act, 1961, introduced by the Finance Act, 1987, would be applicable to the assessment year 1984-85. The Tribunal had set aside the order confirming disallowances under section 43B and remitted the matter back for re-examination. The Court held that the amendments to section 43B by the Finance Acts of 1987 and 1989 should apply to earlier assessment years, clarifying that the provisos inserted by the Finance Act, 1987, relax the main provision of section 43B by permitting deductions for certain liabilities even if paid after the previous year but before the statutory time for filing the return. Treatment of Disallowed Amounts under Section 43B: The Court examined the disallowed amounts under section 43B, including excess sales tax, provision for turnover tax, purchase tax, E. S. I. provision, provident fund contribution, and municipal taxes. The Commissioner (Appeals) had confirmed these disallowances based on the provision not being paid but only accounted for. However, the Tribunal, following the decision in ITO v. K S. Lokhandwala, directed re-examination, emphasizing that the deductions should be allowed if the liabilities are discharged within the statutory time limit or before the due date for filing the return of income under section 139(1). Provision for E. S. I. Liability and Provident Fund Contribution: Regarding the provision for E. S. I. liability and provident fund contribution falling under clause (b) of section 43B, the Court highlighted the second proviso, stating that no deduction shall be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36. The Court clarified that contributions to provident fund or superannuation fund are allowable only if payments are made within the due date under the relevant Acts or Rules governing such contributions. Conclusion: The Court answered both questions in the affirmative and against the Revenue, affirming that the provisions of section 43B should be interpreted to allow deductions if the liabilities are discharged in accordance with the provisos and Explanations. The judgment was delivered by Judges Ajit Kumar Sengupta and Shyamal Kumar Sen of the High Court of Calcutta.
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