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Issues involved: Challenge to section 43B of the Income-tax Act, 1961 for disallowance of deduction claimed for sales tax payment.
Judgment Summary: The High Court of Delhi addressed the challenge to section 43B of the Income-tax Act, 1961, raised by a motor vehicle dealer regarding the disallowance of a deduction claimed for sales tax payment. The petitioner paid sales tax for the quarter ending December 31, 1984, on January 31, 1985, but claimed the deduction in the accounting year relevant to the assessment year 1985-86. The Income-tax Officer disallowed the deduction u/s 43B and added back the amount, leading to additional tax recovery and initiation of penalty and interest proceedings. The court analyzed section 43B, emphasizing that the deduction can only be claimed in the year when the payment is actually made, not when the liability arises as per the mercantile system of accounting. The provision requires the deduction to be claimed in the assessment year corresponding to the year of actual payment, which in this case would be the accounting year ending January 31, 1985, for the assessment year 1986-87. The court rejected the argument that section 43B is arbitrary and impossible to comply with, noting that various provisions in the Income-tax Act require deductions only upon actual disbursements by the assessee. The court found the law clear and unambiguous, stating that non-compliance may lead to consequences but does not render the provision arbitrary or unconstitutional. Regarding the amendment to section 43B in 1987, the court held that it was clarificatory and could not be applied retrospectively to April 1, 1984. The court also addressed a similar writ petition in another case, where no rule nisi was issued, and ultimately dismissed the present petition, finding no merit in the contentions raised. In conclusion, the court dismissed the petition, upholding the application of section 43B for the deduction of sales tax payments and rejecting the challenges raised by the petitioner.
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