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Issues Involved:
The judgment addresses the question of whether sales tax, an accrued liability not payable within the accounting year, could be added back under section 43B of the Income-tax Act, 1961, while computing income on accrual basis. Summary: The case involved an assessee registered under the Karnataka Sales Tax Act, who collected sales tax and surcharge during the last month of the previous year but was required to pay it in the following month. The Revenue disallowed the deduction claimed by the assessee, leading to the matter being brought before the Appellate Tribunal. The Tribunal upheld the deduction, stating that section 43B was not applicable. However, the High Court noted that the specific language of section 43B, along with Explanation 2 introduced in 1984, disallowed deduction for sums not paid during the relevant accounting year, regardless of when the liability was incurred. Explanation 2, introduced with retrospective effect, was not considered by the Tribunal. The High Court directed the matter back to the Tribunal to reconsider in light of Explanation 2. Additionally, the Court highlighted the first proviso to section 43B, allowing deduction if the amount was paid before filing returns for the relevant period. The Court emphasized that this proviso, introduced in 1988, should be applied to pending matters like the present case, providing benefit to the assessee if payment was made before the due date and proof furnished. In conclusion, the High Court disposed of the reference by instructing the Tribunal to consider the effect of Explanation 2 and apply the first proviso to section 43B, granting benefit to the assessee if payment was made before the due date and proof provided.
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