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TMI Blog1997 (2) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... estion has been squarely covered by the decision of the Pune Benches in the case of Maharashtra Scooters [IT Appeal No. 920 (Pune) of 1983, dated 30-11-1988 and IT Appeal No. 870 (Pune) of 1988, dated 28-9-1993]. 5. The learned DR, on the other hand, relied on the orders of the authorities. 6. We have considered the submissions of the parties, gone through the orders of the authorities and case laws relied by the parties and inclined to agree with the submissions made by the learned DR. 7. We have gone through the ITAT's order dated 30-11-1988 passed in Maharashtra Scooters' case (supra) etc., and find that they are not in accordance with the provisions of section 43B and contrary to the intention of the Legislature. We agree with the findings of the authorities. In this connection, we may mention that section 43B was inserted by Finance Act w.e.f. 1-4-1984. The first Pune Bench of ITAT's order dated 30-11-1988 was rendered for assessment years 1978-79 to 1983-84, when the provisions of section 43B were not in the statute. So the findings of the Tribunal in those years could not be disputed. As regards, the findings of the Tribunal in Maharashtra Scooters' case (supra) by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships of the Supreme Court have observed that the marginal note under the heading 'Certain deductions to be only on actual payment'. If the marginal note or heading is any indication, and it certainly is a relevant factor to be taken into consideration in construing the ambit of section, the payments which have not been made are to be taxed. Therefore, the heading of section is clear indication that amounts are to be taxed as the payments have not been made to the Government A/c, because they are trading receipts. This is further abundantly made clear by the non obstante expression used in section 43B, read with marginal note of the section. Their Lordships have also held in the above cited case that section starts with the non obstante clause 'notwithstanding anything contained in any other provisions of this Act etc....", the effect of these words is that even if a particular expense is allowable, it cannot be allowed unless actual payment has been made. Section 43B has an overriding effect on the provisions relating to the computation of income under the head 'Profits and gains of business or profession'. The requirement of section 43B is a mandatory. So, in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide for a tax disincentive by denying deduction in respect of a statutory liability which is not paid in time. The Finance Act, 1987, inserted a proviso to section 43B to provide that any sum payable by way of tax or duty, etc., liability for which was incurred in the previous year will be allowed as deduction, if it is actually paid by the due date of furnishing the return under section 139(1) of the Income-tax Act, in respect of the assessment year to which the aforesaid previous year relates. This proviso was introduced to remove the hardship caused to certain taxpayers who had represented that since the sales tax for the last quarter cannot be paid within that previous year, the original provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter." 11. Before parting with the subject, it may also be mentioned that Hon'ble Supreme Court in the case of CIT v. Distributors (Baroda) (P.) Ltd [1972] 83 ITR 377 at page 383, their Lordships have held that "we cannot say that the Legislature did not know its own mind when it used its own expression in section 23A. We must give some reasonable meaning to that expression. No part of provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance under rule 6D on a trip by trip basis, whereas the same should have been done on the entire trips for the whole year. In this regard, the learned AR of the assessee relied on the decision of ITAT reported in S.V. Ghatalia v. Second ITO [1983] 4 ITD 583 (Bom.). 15. The learned DR, on the other hand, relied on the orders of the authorities. 16. We have considered the submissions of the parties, gone through the orders of the authorities and case laws relied on by both the parties and find that the authorities have gone wrong in making disallowance on trip by trip basis. The I.T. Rules on the issue is very clear besides the case laws relied on by the assessee's learned AR are directly on the issue. In the above-mentioned decision of the ITAT, the Tribunal held that all trips made by persons during the previous year should be taken together in order to determine whether the amount admissible under rule 6D has been exceeded or not. In view of these facts, the authorities are directed to recompute the disallowances. 17. The next ground of appeal in ITA No. 1581/PN/90 is regarding disallowance of entertainment expenses under section 37(2A) of Income-tax Act. 18. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1984-85, the learned CIT(A) had, without discussing the issue, followed the reasoning of his earlier order dated 19-6-1990 passed in the first appeal for the assessment year 1986-87. However, for the other two years, i.e., 1985-86 and 1987-88, two orders in similar terms and similar language were separately passed by the learned first authority. In these two orders also, the facts of the case have not been stated in the required length by the learned first appellate authority. The record also shows that the order of the learned CIT(A) dated 19-6-1990 passed in relation to the assessment year 1986-87 which was followed by the learned CIT(A) in his impugned order for the assessment year 1984-85 was neither filed before this Bench during the course of the arguments on the three appeals nor was it before the learned Accountant Member when he authored the proposed order. I had, therefore, no option but to call for the order passed in the first appeal in relation to the assessment year 1986-87 and the same has since been filed and has been placed on the record. However, during the course of arguments before this Bench, the learned counsel for the assessee had stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his final products. The law relating to sales tax in Maharashtra enables a manufacturer-dealer to tentatively deduct the amount of purchase tax set off of which is claimed by him from the sales tax dues payable by him in his return of sales tax. Such claim of deduction of set off is made as per the system and perception of the assessee and on the basis of the record available with him while filing his return of sales tax. The amount of set off, however, is ascertained, adjudicated and finally allowed by the competent sales tax authority in the sales tax assessment order as and when it is passed. Till such assessment order is passed in the sales tax proceedings, the assessee's claim of set off is only inchoate and is neither finally determined nor adjudicated. Thus, the right of an assessee to his claim of sales tax set off becomes choate and finally available to him only when an assessment order for the year is passed in the sales tax proceedings. Passing of such assessment order very often takes place after a delay of year(s) and till then, the assessee's right to set off remains inchoate. On the passing of the assessment order in the sales tax proceedings, an assessee gets entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n coming to the conclusion that the orders of the learned first appellate authority on this common issue cannot be sustained. For the proper appreciation of the various aspects involved in the issue, it would be necessary to refer, at the very outset, to the relevant provisions of the Bombay Sales-tax Act and Bombay Sales-tax Rules, 1959. The relevant provisions in the Act is contained in section 42 thereof. That section reads as under: "S.42. Draw back, set off, refund, etc.: The State Government may by rules provide, that- (a) in such circumstances and subject to such conditions as may be specified in the rules, a draw back, set off or refund of the whole or any part of the tax- (i) paid or levied or leviable under any earlier law in respect of any earlier sales or purchases of goods which are held in stock by a dealer at the commencement of this Act, be granted to such dealer; or (ii) paid or levied or leviable in respect of any earlier sale or purchases of goods under this Act or any earlier law, be granted to the purchasing dealer; or (iii) paid or levied or leviable under the Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987, be granted to a deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitlement to set off/remission, however, crystallises only when an assessment order is passed by the competent authority in sales tax proceedings. Such entitlement thereupon partakes the character of an income, whether under section 41(1)/41(2) or otherwise. But then an assessee under the Income-tax Act is liable to account for such income only in the assessment year in which the assessment order allowing set off/remission is passed in the sales tax proceedings. Thus the question is really one of accounting of the income and the assessment year in which it is to be accounted for. The question really involved is not one of disallowance of expenditure under section 43B or any other provisions of the Income-tax Act. 8. So far as the second contention of the learned counsel is concerned, here I do not see any reason not to accept the same. Since the net amount payable under the Sales-tax law is the amount arrived at after determining the claim of set off/remission of sales tax, it would be that amount which would be the "sum payable" within the meaning of section 43B of the Income-tax Act. Since that net amount of sales tax accompanies the return, no disallowance under section 43B c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to an aggregate amount of Rs. 8,75,604 consisting of two components of Rs. 8,61,278 and Rs. 14,326. The ground raised in the second appeal before the Tribunal relates to the aggregate sum of Rs. 8,75,604. The facts concerning the second component of an amount of Rs. 14,326 have not been fully stated in the impugned order of the learned CIT(A). In absence of this, I am not in a position to ascertain as to exactly what are the facts relating to the second component of Rs. 14,326. Be as it may. The question involved in relation to both the components can only be of application of section 43B. As such, it would not be difficult for me to pass appropriate order in relation to the two components. So far as the component of set off/remission of sales tax is concerned, according to me, my order in the foregoing paras shall govern that part of the dispute. As regards the other component, I direct that in consonance with the ratio of the decision of the Patna High Court in the case of Jamshedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 70/54 Taxman 521, deduction of such of the sales tax or other statutory dues as have been paid during the accounting period relevant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ringhee Sales Bureau (P.) Ltd. (supra), Sinclair Murray Co. (P.) Ltd. (supra) and Central Wines (supra). He also was of the view that under the provisions of section 43B the expenditure was allowed to be deducted only on actual payment. He also dealt with the intention of the Legislature in enacting the provisions of section 43B of the Income-tax Act. He also did not agree with the views expressed by the other Benches of the Tribunal and held that the sales tax collected and not paid was liable to be disallowed under section 43B of the Income-tax Act. On these facts, the point of difference of opinion was formulated in the following manner and it came up before me as Third Member under section 255(4) of the Income-tax Act: (1) Whether the issue of purchase/sales tax set off involves the question of accounting of income? (2) In case the answer to question No. 1 is in affirmative, then in what assessment year such income is to be accounted for? (3) Whether provision of section 43B is attracted in the case of purchase/sales tax set off? (4) Where the amount of purchase/sales tax set off is deducted out of sales tax dues payable for the year, whether such amount should be dee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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