1992 (4) TMI 84 - AT - Income Tax

Summary

Issues:
1. Disallowance under section 40A(8) in respect of interest paid to companies, directors, and shareholders.
2. Disallowance under section 43B relating to sales tax amount.

Analysis:

Issue 1: Disallowance under section 40A(8)
The Assessing Officer disallowed Rs. 33,924 under section 40A(8) of the Act in respect of interest paid to companies, directors, and shareholders. The CIT(A) directed to exclude the payment to companies from the disallowance under section 40A(8) as these companies were outside the purview of that section. The Revenue accepted this decision. Regarding interest paid to directors and shareholders, the CIT(A) deleted the disallowance based on a previous Tribunal decision for the assessee for the assessment year 1982-83. The Tribunal upheld the CIT(A)'s decision, stating that no disallowance under section 40A(8) should be made on interest paid to directors and shareholders. The Revenue's appeal was dismissed as the decision was in conformity with previous Tribunal rulings.

Issue 2: Disallowance under section 43B
The Assessing Officer disallowed Rs. 95,640 under section 43B, which the assessee challenged on various grounds. The CIT(A) rejected the assessee's contentions and upheld the disallowance. The assessee argued for deletion of the disallowance, citing decisions from several High Courts. The Departmental Representative argued that Delhi High Court decisions had a binding effect on this case. After considering the arguments, the Tribunal confirmed the disallowance under section 43B. The Tribunal held that the proviso to section 43B, applicable from assessment year 1988-89, did not allow deduction for unpaid sales tax at the close of the previous year. The Tribunal followed the Delhi High Court's stance that the proviso was applicable prospectively. The decision of the jurisdictional High Court was deemed binding unless reversed by the Supreme Court. The Tribunal dismissed the assessee's appeal, stating that deduction would be allowed in the year of payment.

In conclusion, the Tribunal dismissed both the Revenue's and the assessee's appeals, upholding the disallowances under section 40A(8) and section 43B, respectively. The decisions were based on interpretations of relevant legal provisions and precedents set by higher courts.