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Issues:
1. Interpretation of Section 43B of the Income Tax Act regarding deduction of sales tax payable. 2. Application of Section 43B to the case involving sales tax collected by the assessee. 3. Consideration of accrual of income and liability in relation to Section 43B. 4. Comparison with relevant Supreme Court judgments in similar cases. Analysis: 1. The case involved the interpretation of Section 43B of the Income Tax Act, which deals with the deduction of sums payable by the assessee by way of tax or duty. The assessee had been following a method of accounting where sales tax collected from customers was kept in a separate account and paid to the government in the subsequent month without including it in sales or claiming a deduction. The Income Tax Officer (ITO) added the sales tax amount to the income for the assessment year 1984-85 under Section 43B, leading to an appeal by the assessee. 2. The Revenue argued that sales tax forms part of sales and should be included as income, citing a Supreme Court case. They contended that prior to the introduction of Section 43B, sales tax was deducted even if not paid, but the new provision required actual payment for deduction. The assessee, on the other hand, argued that the sales tax collected was payable in the next month and not during the year in question, making Section 43B inapplicable. They also highlighted that their accounting method did not allow for the inclusion or deduction of sales tax. 3. The Tribunal examined the provisions of Section 43B and relevant Supreme Court judgments. It noted that the sales tax collected in one month was payable in the next month, thus not meeting the criteria of being 'payable' during the relevant year. The Tribunal emphasized that under the regular accounting method of the assessee, there was neither accrual of income nor liability, which impacted the application of Section 43B. It clarified that the section applies when there is an accrual of income, and if there is no accrual of income as per the accounting method, the question of adjusting liability does not arise. 4. The Tribunal referred to two Supreme Court judgments related to wealth tax cases to distinguish the applicability of Section 43B in the present scenario. It highlighted that the timing of payment and the accrual of debt were crucial in determining the 'payability' of tax. The Tribunal concluded that the order of the Appellate Authority did not require any modification and dismissed the appeal filed by the Revenue. In conclusion, the Tribunal upheld the decision of the Appellate Authority, emphasizing that the sales tax collected by the assessee was not 'payable' during the relevant year, making Section 43B inapplicable. The judgment provides a detailed analysis of the legal provisions and relevant case laws to support the decision.
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