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2020 (9) TMI 332 - HC - Income TaxDisallowance u/s 43B - Deduction of Security Transaction Tax (STT) against the transaction of trading - AO found the said amount of STT not to be deposited with the authorities, and as such provisions of Section 43 - HELD THAT - The said Section is an exception to the mercantile system of accounting. It is explicitly added to correct the mischief of claiming deductions without payment of taxes due even at a later stage. The expression used is same is actually paid by him. In any event, we find the issue is no longer res Integra for Constitutional validity of Section 43B, more particularly Clause (f) thereof, stands affirmed by the Hon'ble Apex Court in Union of India Ors. Exide Industries Limited Anr. 2020 (4) TMI 792 - SUPREME COURT . Undisputedly, petitioner had not deposited the amount deducted as STT with the authorities, and it is not his case that the same stood paid back/returned to the person from whom it stood deducted. It is the admitted case of the petitioner that since the petitioner was adopting the mercantile system of accounting; he was not supposed to take any action. Even on this count, given law discussed above, more so Exide Industries Limited (supra). (supra) and Mcdowell 2009 (5) TMI 28 - SUPREME COURT the orders cannot be said to be perverse and illegal warranting interference by this Court. WP dismissed.
Issues:
Challenge to order of assessment under Section 43B of the Income-Tax Act, 1961. Analysis: Issue 1: Challenge to the order of assessment under Section 43B The petitioner challenged the order of assessment dated 26.12.2008, which disallowed an amount of ?17,87,530/- deducted as Security Transaction Tax (STT) against trading transactions. The Income Tax Officer applied Section 43B as the STT amount was not deposited with the authorities. The Commissioner of Income Tax affirmed this order. The petitioner relied on various court decisions to argue against the order's legality and perversity. Issue 2: Interpretation of Section 43B Section 43B mandates deductions only on actual payment, overriding other provisions. The legislative intent behind Section 43B was to prevent taxpayers from claiming deductions without paying statutory liabilities. The Court affirmed the constitutional validity of Section 43B in Union of India v. Exide Industries Limited. The provision is an exception to the mercantile accounting system, ensuring taxes due are actually paid. Issue 3: Application of Section 43B The Court held that Section 43B operates as an additional condition for deductions, not limiting the autonomy of the assessee in choosing an accounting method. It prevents fraud on revenue by ensuring actual payment of specified liabilities. The Court emphasized that bank guarantees do not fulfill the payment requirement under Section 43B. Conclusion Based on the binding precedents of the Apex Court, the Court dismissed the writ petition challenging the assessment order. The petitioner's failure to deposit the STT amount and the application of the mercantile accounting system were not sufficient reasons to interfere with the orders. The Court found no grounds to accept the petitioner's contentions, given the legal principles discussed and the precedents cited. This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the Court's reasoning and decision.
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