2010 (12) TMI 933 - HC - Income Tax

Deferred payment of the sales tax - whether the circular No. 674, dated December 29, 1993 issued by the State of Bihar in relation to the scheme for deferred payment of the sales tax would be valid for the purposes of giving concession to the assessee? - Held that - Language used in the circular, referred to hereinabove clearly, makes out a case where such concession was available to the assessees and as such, deferred payment of sales tax would be deemed to be a loan which was paid subsequently and in that view of the matter, the deduction was held permissible. The arguments of the learned counsel that there is no such law and no amendment in the Sales Tax Act of the State of Bihar has been made, is not acceptable because the Central Board of Direct Taxes itself, in the circular aforesaid, has accepted that by circular such concession can be allowed, no force in these appeals. These appeals are, therefore, held meritless and are dismissed.

Summary

Issues:
Validity of circular for deferred payment of sales tax for deduction under section 43B of the Income-tax Act.

Analysis:
The primary issue in this case revolves around the validity of a circular issued by the State of Bihar concerning the scheme for deferred payment of sales tax and its applicability for providing concessions to the assessee under section 43B of the Income-tax Act, 1961. The Tribunal ruled in favor of the assessees, stating that the circular issued by the State Government would suffice to allow for deduction under section 43B. The counsel for the assessee highlighted Circular No. 674 issued by the Central Board of Direct Taxes, emphasizing that any deferment scheme in compliance with State law would be covered by the circular, thereby making the accommodation available to the assessee.

The Tribunal upheld the Commissioner of Income-tax's order, affirming that the application of section 43B of the Income-tax Act to the assessee did not involve any illegality. The High Court, upon careful consideration, found that the language used in the circular clearly indicated that the concession was available to the assessees. The deferred payment of sales tax was deemed akin to a loan that was paid subsequently, making the deduction permissible. The court rejected the argument put forth by the counsel that no amendment in the Sales Tax Act of the State of Bihar had been made, asserting that the circular from the Central Board of Direct Taxes acknowledged the allowance of such concessions through circulars. Consequently, the court deemed the appeals meritless and dismissed them.

In conclusion, the judgment establishes the validity of the circular issued by the State of Bihar regarding deferred payment of sales tax for the purpose of deduction under section 43B of the Income-tax Act. The court's interpretation of the circular and its alignment with the provisions of the Income-tax Act led to the dismissal of the appeals, upholding the decision in favor of the assessees.