2014 (6) TMI 182 - AT - Income Tax

Deduction u/s 43B against payment of past dues - Relevant Financial year - payment of service-tax and sales-tax Held that;- The extended period for paying any sum covered u/s 43B is only in respect of the sums for which the liability arises during the relevant previous year, so that even if not paid during the year but by the date of furnishing the return for that year, deduction in its respect, notwithstanding the prescription of section 43B, i.e., actual payment, would hold it would apply only to the sums pertaining to the FY 2007- 08, the PY relevant to A.Y. 2008-09 - the entire liability relates to a period/s prior to FY 2007-08 thus, it would be allowed only in the year of payment, and which happens to be the PY relevant to the current AY there was no merit in the revenue s appeal Decided against Revenue.

Summary

Issues:
Allowability of deduction for service-tax and sales-tax paid in previous years under section 43B of the Income Tax Act, 1961.

Analysis:
The Appellate Tribunal, Mumbai, heard an appeal by the Revenue against the Commissioner of Income Tax (Appeals) order allowing the assessee's appeal regarding the assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2009-10. The main issue in the appeal was the deduction of service-tax and sales-tax paid in previous years amounting to Rs. 7,49,874 and Rs. 3,63,263 respectively. The Assessing Officer had denied the deduction on the grounds that these payments pertained to preceding years. However, the assessee contended that the sums were covered under section 43B of the Act, making them allowable deductions. The Tribunal noted that the Revenue's argument that the payments were made before filing the return for the relevant assessment year was not valid. The Tribunal clarified that under section 43B, the extended period for paying such sums applies only if the liability arises during the relevant previous year. Since the payments in question related to periods before the relevant previous year, they could only be allowed as deductions in the year of actual payment, which was the current assessment year. The Tribunal found no dispute regarding the payments made during the current year and upheld the Commissioner's order, dismissing the Revenue's appeal.

The Tribunal emphasized that the provisions of section 43B of the Income Tax Act, 1961 are clear regarding the allowability of deductions for certain payments, and in this case, the payments for service-tax and sales-tax made in previous years were allowable deductions in the current assessment year. The Tribunal rejected the Revenue's argument that the payments were made before the filing of the return for the relevant assessment year, as the key factor for deduction under section 43B is the liability arising during the relevant previous year. Since the payments were confirmed to have been made during the current assessment year, the Tribunal upheld the Commissioner's order allowing the deductions. The Tribunal's decision highlights the importance of adhering to the specific provisions of the Income Tax Act when determining the eligibility of deductions for certain payments made in previous years.