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Issues involved: Interpretation of section 43B of the Income-tax Act, 1961 regarding the treatment of sales-tax liability under a sales-tax deferment scheme.
ITA No. 3365(Ahd)/1987: The assessee, a registered firm manufacturing wall-clocks, collected sales-tax under a deferment scheme where the liability was to be paid in instalments after 12 years. The Income Tax Officer (ITO) disallowed the liability under section 43B, adding the collected amount to the assessee's income. The CIT(Appeals) upheld the addition, leading to the appeal. The Tribunal held that the liability was discharged as per government instructions, treating it as an interest-free loan payable after 12 years, thus not justifying the addition under section 43B. Citing CBDT instructions, the Tribunal deleted the addition, allowing the appeal. ITA No. 3368(Ahd)/1987: In this appeal by an assessee dealing in roofing tiles, facing a similar sales-tax liability situation, the ITO's addition was confirmed by the CIT(Appeals). The Tribunal, considering the recent amendments in section 43B and specific government instructions discharging the liability, held that the liability was effectively discharged, making the addition unjustified under section 43B. Referring to CBDT instructions, the Tribunal deleted the addition, allowing the appeal. The Tribunal emphasized that the liability for sales-tax was considered discharged due to specific government instructions, treating it as an interest-free loan payable after 12 years. The Tribunal referred to CBDT instructions clarifying the treatment of deferred sales-tax payments under section 43B, highlighting that amendments in sales-tax laws by State Governments could deem the liability as discharged for section 43B purposes. As Gujarat had made necessary amendments through executive instructions, the Tribunal concluded that section 43B did not warrant the additions made by the ITO, thus allowing the appeals.
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