1992 (11) TMI 144 - AT - Income Tax

Summary

Issues:
1. Interpretation of proviso No. 1 to section 43B of the Income-tax Act.
2. Application of section 43B to an assessee maintaining accounts on a cash basis.
3. Disallowance of sales-tax payments under section 43B by the Income-tax Officer.
4. Rectification of assessment order by the Dy. Commissioner(Appeals).
5. Validity of the order of the Dy. Commissioner(Appeals) in allowing the appeal.

Detailed Analysis:

1. The main issue in this case is the interpretation of proviso No. 1 to section 43B of the Income-tax Act, introduced with effect from 1-4-1988. The question is whether this proviso applies to an assessee who maintains accounts on a cash basis and whether payments made outside the accounting year but before the time allowed for filing the income-tax return under section 139(1) can be claimed as a deduction under section 43B.

2. The assessee in this case maintained accounts on a cash basis and had made sales-tax payments outside the accounting year but before the deadline for filing the income-tax return. The Income-tax Officer disallowed these payments under section 43B, leading to a dispute that was taken to the Dy. Commissioner(Appeals) who allowed the appeal, stating that the disallowance was not justified under section 143(1)(a).

3. The Income-tax Officer's decision to disallow the sales-tax payments under section 43B was based on the argument that the assessee followed a cash system of accounting for sales-tax. However, the advocate for the assessee contended that proviso No. 1 to section 43B allows for the deduction of statutory liabilities irrespective of the method of accounting followed by the assessee.

4. The Dy. Commissioner(Appeals) held that the adjustments made by the Income-tax Officer were not in line with the provisions of section 143(1)(a) and ordered the deletion of the disallowed amount from the total income of the assessee. The Revenue then filed an appeal against this decision, leading to the present case.

5. The Tribunal analyzed the Finance Minister's speech introducing section 43B and the subsequent amendments, including Explanation 2 and proviso No. 1. It was held that these provisions confer a privilege on the assessee regardless of the method of accounting followed. The Tribunal found that the proviso applied to all assessees, including those maintaining accounts on a cash basis, and dismissed the Revenue's appeal.

6. In conclusion, the Tribunal upheld the decision of the Dy. Commissioner(Appeals) based on the application of proviso No. 1 to section 43B, which allows for the deduction of statutory liabilities irrespective of the method of accounting followed by the assessee. The judgment emphasizes the inclusive nature of section 43B and its provisions, ensuring that statutory liabilities are allowed as deductions based on actual payments made by the assessee.