2024 (11) TMI 1390 - HC - Income Tax

Disallowance u/s 43B - non-payment of liabilities such as VAT, Entry Tax, CST before the prescribed date of filing the return of income u/s 139 (1) - HELD THAT - It is admitted position on record that the appellant / assessee did not claim the amount in his profit and loss account as an expenditure / deduction, nor the appellant claim deduction in respect of that account u/s 43B. In that view of the matter, the AO, CIT(A) and the ITAT, all three authorities have concurrently erred in holding that the appellant has claimed deduction / expenditure u/s 43B of the IT Act adding to its taxable income. Accordingly, the impugned order passed by the ITAT holding that the appellant is liable to pay tax is liable to be and is hereby set aside. The substantial question of law is answered in favour of the assessee and against the Revenue.

Summary

Issues:
Challenge to legality, validity, and correctness of ITAT's judgment on disallowance under Section 43B of the IT Act.

Analysis:
The tax appeal under Section 260A of the Income-tax Act, 1961 questions the ITAT's judgment on disallowance of Rs. 62,32,262 under Section 43B. The appellant, a partnership firm, did not claim the amount in the profit and loss account as expenditure. The CIT(A) partly allowed the appeal, but upheld the disallowance. The ITAT also dismissed the appeal, leading to the current challenge.

The substantial question of law is whether the disallowance under Section 43B was justified. The appellant did not claim deduction of indirect taxes in computing income. The appellant argued that since no deduction was claimed, invoking Section 43B was erroneous. The appellant cited a relevant court decision to support this argument.

The ITAT's decision was based on the appellant not claiming the amount in the profit and loss account as expenditure. The court examined Section 43B(a) of the IT Act, which mandates deductions only on actual payment. Citing the decision in M/s Ganapati Motors, the court emphasized that if an amount is not claimed as a deduction, it cannot be disallowed under Section 43B.

Referring to another court decision, the court reiterated that if an amount is not debited to the Profit & Loss Account or claimed as a deduction, disallowing it would not be justified. In this case, the appellant did not claim the amount as an expenditure or deduction under Section 43B.

Conclusively, the court found that the appellant did not claim the amount in question as an expenditure or deduction, and thus, the authorities erred in holding it as taxable income. The ITAT's decision was set aside, ruling in favor of the appellant. The tax appeal was allowed accordingly.