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TMI Blog1989 (3) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... e on identical point, the Tribunal decided against the assessee. The point at issue now being identical and agreed to be so by the parties before us, following with respect the order of the Tribunal for the preceding year 1982-83, we hold that the Commissioner (A) was right in reducing the actual cost for the purpose of allowance of depreciation and investment allowance the amount received from the insurance company. 3. The next ground urged was that the Commissioner (A) erred on facts and in law in confirming the action of the Inspecting Asstt. Commissioner (Asstt.) in allowing 10 per cent of the expenditure on entertainment towards the employees' participation as against the claim of 50 per cent of the expenditure made by the appellant. The orders show that the assessee had incurred entertainment expenditure of Rs. 2,22,006 and claimed that out of the sum 50 per cent. was spent on employees' participation in business meetings and expenditure to that extent should not be considered as entertainment expenditure disallowable under the provisions of section 37(2A) of the Act. The Inspecting Asstt. Commissioner did not agree with this submission and restricting the participation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Commissioner (A) erred on facts and in law in sustaining disallowance of Rs. 1,00,17,506 u/s. 43B of the Income-tax Act being sales tax payable. This sum of Rs. 1,00,17,505 represented the outstanding liability of sales tax and the Inspecting Asstt. Commissioner disallowed this sum by applying the provisions of section 43B of the Income-tax Act. The submission of the assessee was that the amount of sales tax collected by it from the customers was not deposited with the Government by30-6-1984only because the due date for payment did not fall due on30-6-1984, the end of the accounting year. The amount fell due for payment subsequent to the accounting year and the entire amount was paid by 31-7-1984, which was the last date allowable under the various Sales Tax Acts, under which the sum became payable. The assessee claimed that since these sums due under the various Sales Tax Acts did not become payable, the provisions of section 43B were not attracted and disallowance should not be made at all. It also claimed that the liability to pay sales tax arose as and when the taxable event took place and that outstanding liability has to be allowed as a deduction as per the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Saraf [1978] 113 ITR 589. He further submitted that the language of section 43B does not permit disallowance of sums which are not payable though became due. He sought to distinguish sums which became due but not payable and sums which became due and payable. According to him the language of section 43B permitted disallowance of those sums which became due and payable and not of the former category. The intent of the Legislature was to put a curb upon deductions of sums which have not been paid to the respective authorities though became due under the various Statutes, under which they are payable, namely, excise duty, sales tax etc. For the Revenue Smt. Manjari Kackar, on the other hand, submitted that under the Finance Bill of 1989 introduced in the Parliament on 28-2-1989, Explanation 2 has been inserted and as it shall be deemed to have been inserted with effect from 1-4-1984 its effect is that for the purpose of clause (a) of section 43B as in force at all material times " any sum payable " means a sum for which the assessee incurred a liability in the previous year even though such sum might not have been payable within that year under the relevant law. By this Explanation, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because if a sum has not become due then it would not be a liability and a deduction in respect of that would not be otherwise allowable under the Act. That sum, which became due therefore eligible for deduction, would not be allowed if it is not payable. Therefore payability of the sum which became due has become significant and relevant for the prohibition contained in section 43B to be attracted. In other words for section 43B to apply the twin conditions to be satisfied are that a deduction must first otherwise become allowable under the Act and that the amount by way of tax or duty must then become payable under any law for the time being in force. The satisfaction of both these conditions appear to be cumulative from a reading of section 43B. It was this aspect that was emphasised by the Andhra Pradesh High Court, when it held that the sums becoming due but not payable before the accounting year would not come within the mischief of section 43B i.e. would not suffer disallowance. It is an admitted fact that other than the decision of the Andhra Pradesh High Court, there is no decision of any other High Court taking a contrary view. In such a situation what ought to be done by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nywhere in the country, however, have to respect the law laid down by the High Court, whether of the State in which they are functioning or of a different State, in the absence of any contrary decision of any other High Court. " Here also we are not referring to the facts of the case, which gave rise to these observations but these observations, which reiterate the law of precedence laid down by the Bombay High Court are in a way binding on us we are functioning within the jurisdiction of the Delhi High Court as also the assessee and the Income-tax Officer. The Delhi High Court has gone a step further and said that it is not only the Income-tax Appellate Tribunal, that should respect the law laid down by any High Court but all the Income-tax authorities have a similar duty and obligation. Following therefore with respect the interpretation placed upon section 43B by the Andhra Pradesh High Court and the rule of precedence as explained by the Delhi High Court, we hold that the assessee is entitled to the deduction of the sums that became due but not payable within the accounting year. On page 11 of the paper book the assessee furnished to us a list of the sales tax due under the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head 'Profits and gains of business or profession'. " Sub-section (3B) referred to in section 37(3A) was in the following terms : " (3B) The expenditure referred to in sub-section (3A) is that incurred on --- (i) advertisement, publicity and sales promotion ; or (ii) running and maintenance of aircraft and motor cars ; or (iii) payments made to hotels. Explanation : For the purposes of sub-sections (3A) and (3B), --- (a) the expenditure specified in clause (i) to clause (iii) of sub-section (3B) shall be the aggregate amount of expenditure incurred by the assessee as reduced by so much of such expenditure as is not allowed under any other provision of this Act ; (b) expenditure on advertisement, publicity and sales promotion shall not include remuneration paid to employees of the assessee engaged in one or more of the said activities ; (c) expenditure on running and maintenance of aircraft and motor cars shall include, --- (i) expenditure incurred on chartering any aircraft and expenditure on hire charges for engaging cars plied for hire ; (ii) conveyance allowance paid to employees and, where the assessee is a company, conveyance allowance paid to its dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was placed by the learned counsel for the assessee on a decision of the Bombay Bench of the Income-tax Appellate Tribunal in the case of B.A. Bros. (Bombay) (P.) Ltd. v. 8th ITO [IT Appeal No. 1027 (Bom.) of 1985]. This appears to be a direct decision on the matter where the learned Bench observed that under section 31 repairs to machinery and plant are to be allowed which would cover motor cars also. Reliance was also placed upon a decision of the Bombay High Court in the case of CIT v. Chase Bright Steel Ltd. [1989] 75 CTR (Bom.) 60, a copy of which is made available to us at page 46 and onwards of the paper book. Reliance was also placed upon a decision of the Bombay Bench of the Tribunal in American Bureau of Shipping v. ITO [1986] 19 ITD 793 for the view that section 37 would not apply for allowing the deductions otherwise allowable under sections 31 to 36. 11. For the Revenue, however, defending very strongly the orders of the authorities below, it was submitted that section 37 was a general section and that general section overrides all the other sections including section 31. It was also pointed out that sub-section (3A) of section 37 was a non obstante clause and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the application of section 37(3A) to section 31. There the assessee paid rent of Rs. 8,400 in respect of a flat inBombay. Half of the flat was used for residence and the other half as a guest house. The assessee incurred certain expenditure on the maintenance of the guest house. The Income-tax Officer disallowed the expenditure pertaining to the guest house, which was confirmed by the Appellate Asstt. Commissioner on appeal. However, the Tribunal accepted the submission of the assessee that the expenditure in question was covered by sections 30 and 31 and not by section 37(1). On a reference, the Bombay High Court held : " Coming then to the provisions of sub-section (3) of section 37, it is seen that the provisions in that sub-section start with a non obstante clause " Notwithstanding anything contained in sub-section (1). . . ." which of necessity must relate to expenditure allowable under sub-section (1) of section 37 of the Act and no other provisions. This being so and the assessee's case, as stated by us above, not falling to be considered under section 37(1) of the Act, we are in agreement with the view taken by the Tribunal that the deduction in respect of rent for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5AA belongs to the same family of patent rights or copyrights as it deals with the expenditure on know-how. Section 35B deals with export markets development allowance and section 35C deals with agricultural development allowance. Section 35CC deals with rural development allowance and section 35CCA deals with expenditure by way of payment to association and institutions for carrying out rural development programmes. Section 35CCB deals with expenditure by way of payment to associations and institutions for carrying out programmes of conservation of natural resources. Section 35D deals with amortisation of certain preliminary expenses. Section 35E deals with the deduction for expenditure on prospecting etc. for certain minerals. Section 36 deals with other deductions like insurance, bonus or commission paid to employees, interest paid on capital borrowed, contribution to Provident Fund, provision for bad and doubtful debts, reserves created etc. etc. Nowhere in the sections we find any mention about the allowance of expenditure on advertisement, publicity, sales promotion, payments made to hotels, running and maintenance of aircraft or motor cars. Since the intention of the Legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be entitled to investment allowance and since the Parliament was aware of the possibility of an argument that plant would include motor cars, as embraced by the expression 'vehicles', specifically provided for its exclusion in section 32A. Otherwise there was no need for the Legislature to specify in section 32A that road transport vehicles would not be entitled to deduction. Not only that it also excluded the machinery or plant installed in any office premises or any residential accommodation including the guest house. It also referred to certain other machinery, which would not qualify for investment allowance. From these exclusions which are made with a specific purpose, it cannot be inferred that the expression " vehicles " used in the definition of the " Plant " does not include motor cars. On the contrary the exclusion shows the anxiety of the Legislature in defeating a possible claim that could be made for the allowance of investment allowance on motor cars also. We are therefore of the opinion that the expression " vehicles " used in " plant " includes cars and that the decision given by the Bombay Bench of the Tribunal in the case referred to above is not an incorrect dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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