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Issues: Interpretation of section 43B of the Income-tax Act, 1961 regarding the deduction of Central and West Bengal sales tax paid within statutory due dates but not within the previous year.
In this judgment, the court addressed the question of law regarding the interpretation of section 43B of the Income-tax Act, 1961, in relation to the deduction of sales tax paid within statutory due dates but not within the previous year. The Assessing Officer disallowed amounts of Central and local sales tax collected but remaining unpaid till the end of the previous year. The assessee argued that the sales tax collections were not part of the profit and loss account, as a separate account was maintained, and the unpaid balances were carried forward as "Sundry creditors." The Commissioner of Income-tax (Appeals) allowed the claim, relying on a Tribunal decision, and deleted the addition made by the Income-tax Officer. On appeal to the Tribunal, the issue revolved around the applicability of Explanation 2 to section 43B of the Income-tax Act, inserted with retrospective effect from April 1, 1984. The Revenue contended that the Commissioner of Income-tax (Appeals) erred in deleting the addition, citing the statutory force of the Explanation. However, the assessee's counsel supported the deletion, referencing a Tribunal decision. The Tribunal observed that the sales tax collections were made in the last quarter of the year, and payments were within statutory due dates as per Sales Tax Acts. Relying on a previous Tribunal decision, the Tribunal upheld the Commissioner's decision but restored a portion of the disallowance due to unpaid balance. A Division Bench of the High Court had previously considered a similar question in another case and ruled in favor of the assessee. Following that decision, the court answered the reference question affirmatively in favor of the assessee. The court made no order as to costs, and both judges concurred with the decision.
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