1996 (4) TMI 161 - AT - Income Tax

Summary

Issues:
1. Incorrect disallowance under section 43B of the IT Act.
2. Erroneous acceptance of sales-tax liability deduction.

Analysis:

The appeal before the Appellate Tribunal ITAT Jaipur was against the order of the CIT passed under section 263 of the IT Act, 1961. The CIT found errors in the order passed by the Dy. CIT, including the failure to disallow an amount representing outstanding sales-tax interest under section 43B and wrongly accepting the deduction claim for sales-tax liability outstanding as of a specific date. The CIT issued a show cause notice, and after considering the assessee's contentions, concluded that the AO's order was erroneous and prejudicial to the Revenue's interests.

Regarding the first issue, the authorized representative for the assessee argued that the interest outstanding should be allowable under section 36(1)(iii) of the IT Act and as per the Rajasthan Sales-tax Act. However, the Departmental Representative supported the CIT's order, citing decisions that interest levied for delayed payment should only be allowed upon actual payment. The Tribunal held that the interest amount was disallowable under section 43B, upholding the CIT's decision on this point.

On the second issue of sales-tax liability deduction, the authorized representative contended that the deduction claimed by the assessee was justified as it was paid before the due date. The Departmental Representative supported the CIT's decision. The Tribunal disagreed with the CIT, citing a decision by the Patna High Court that allowed deduction for sales-tax paid before the filing of the return. Consequently, the Tribunal held that the CIT was not justified in setting aside the AO's order on this issue.

In conclusion, the Tribunal partially upheld the CIT's order under section 263. The disallowance of interest outstanding was deemed erroneous and prejudicial to the Revenue's interests, while the disallowance of unpaid sales-tax liability deduction was not upheld. As a result, the appeal by the assessee was allowed in part.