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2007 (5) TMI 168 - HC - Income TaxBusiness Expenditure Excise duty collected but not paid by the assessee in the Government treasury not deductible as per Section 43B of the Act held by the tribunal and also upheld by the HC
Issues:
Disallowance under section 43B of the Income-tax Act, 1961 for not depositing excise duty in the Government treasury. Detailed Analysis: Issue 1: Disallowance under section 43B of the Income-tax Act The case involved a question of law referred by the Income-tax Appellate Tribunal regarding the disallowance of Rs. 2,16,007 under section 43B of the Income-tax Act, 1961. The assessee had realized excise duty from customers but did not deposit it in the Government treasury, claiming a stay order until the writ petition's disposal. The Assessing Officer added the amount to the income, which was later deleted by the Commissioner of Income-tax (Appeals) based on a previous order. However, the Tribunal allowed the Department's appeal, citing section 43B introduced in 1984, which disallows deductions for duties realized but not deposited, especially in cases like this with a court-issued stay order. Issue 2: Applicability of Section 43B The counsel for the assessee argued that the excise duty realized in 1978, before the introduction of section 43B in 1984, should not be subject to disallowance. However, this argument was dismissed as misconceived since the duty was not deposited despite being realized. The Assessing Officer's findings confirmed that the excise duty formed part of the trading receipt, and as it was not paid to the concerned Department, deduction under section 43B was deemed inadmissible for the assessment year 1986-87. Conclusion The High Court upheld the Tribunal's decision, ruling in favor of the Revenue and against the assessee. The court affirmed that the excise duty realized but not deposited did not qualify for deduction under section 43B of the Income-tax Act, 1961. The judgment emphasized the importance of complying with tax laws and ensuring timely deposits to the Government treasury to claim deductions appropriately.
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