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TMI Blog2011 (2) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the present case would actually have flowed before the date of filing of the return, the only consequence being that such date is extended by three months as a consequence of the order passed by the assessing authority on the application of the assessee filed within time - Decided in the favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... s account to the total income of the assessee. 6. In order to appreciate the controversy, it is necessary to reproduce the provisions which have to be considered in this behalf and the same are as under: "Section 43 B 43B. Certain deductions to be only on actual payment.--Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-- (a) any sum payable by the assessee by way of tax or duty under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employee, shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) which is actually paid by the assessee on or before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee shall be liable to pay simple interest at fifteen per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source: Provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section. (b) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, the amount of tax on which interest was payable under this sub-section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and-- (i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the submission of the department that authorization bestowed on the Assessing Officer (in short „AO‟) on account of a proviso to Section 139(1) of the IT Act to extend the date for furnishing the return in its discretion does not empower the AO to change the due date for filing the return as mentioned in the main clause of Section 139 of the IT Act and, that is the reason that as per the proviso interest has to be paid by the assessee in accordance with Section 139(8) of the IT Act mandatorily even if the date for filing of return is extended by the AO. The proviso to Section 43B was, thus, contended not to be applicable where the amount is not paid as per the due date as specified in the main provision of Section 139(1) of the IT Act. 9. It was emphasized that the object with which the proviso to Section 43B was inserted must be kept in mind. This was a sequitur to the department finding out that certain assessees were claiming a liability on the basis of accrual following the mercantile system of accounting but were disputing the payment of such liabilities or not paying such liabilities altogether. Thus, the benefit was extended to the assessees only if they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 677. The question which was examined was whether the proviso clarifying the sums paid after the accounting year but before the due date of submission of return was retrospective in character. The principle of reasonable construction was applied since the proviso inserted was to remedy unintended consequences, it was treated as retrospective. The budget speech of the Finance Minister for the year 1983-84 reported in (1983) 140 ITR (St.) 31 was referred to where in para 60 it is stated as under: "60. Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer‟s contribution to provident fund, Employees‟ State Insurance Scheme, etc., for long periods of time, extending sometimes to several years. For the purpose of their income-tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual basis. On the other hand, they dispute the liability and do not discharge the same. For some reason or the other, undisputed liabilities also are not paid. To curb this practice, it is proposed to provide that deduction for any sum payable by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum payable by way of tax, duty, cess or fee, etc., is allowed on actual payment basis only. The objective behind these provisions is to provide 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 a 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 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 the previous year, the original provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter. 15.2. Certain courts have interpreted the provisions of section 43B in a manner which may negate the very operation of this section. The interpretation given by these courts revolves around the use of the words „any sum payable‟. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extension is pleaded to be that the date for filing of the return stands shifted to the date up to which extension is granted with all natural consequences. 18. We may refer to two judgements cited in this behalf, which are germane to the issue. The first is in the case of Mehsana Ice & Cold Storage P. Ltd. Vs. CIT (2005) 275 ITR 601 by the Division Bench of the Gujarat High Court. For the assessment year 1985-86 the assessee sought extension of time up to 31.12.1985 and tendered the return within that time. The application seeking extension of time was neither rejected nor granted and it was held that in view of the pronouncements the extension application was construed to have been granted and thus the return was within time, and as a sequitur to that, the assessee could not be denied the benefit of carrying forward the business losses. In that context it was observed as: "Under section 139(3) of the Act a return of loss has to be furnished within the time allowed under sub-section (1) or within such further time which, on an application made in the prescribed manner, the Assessing Officer may, in his discretion, allow. The assessee being a limited company, under normal circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer acting, on an application made by the assessee for the purpose and extending the date for furnishing the return. The ratio of the said decision is (i) that in the ordinary course of things, the Income-tax Officer could have extended the date only upon being satisfied that there was good reason for doing so, and that would have been on the grounds pleaded by the assessee and that in the circumstances of this case, a presumption could validly be raised that all that was done ; (ii) that, on the facts, the extension was a matter falling within section 139(1) and the returns furnished by the assessee must be attributed to that provision ; they were not returns furnished within the contemplation of section 139(4) ; (iii) that, therefore, the penalty provisions did not come into play at all." The stand of the department was: "Learned lawyer appearing for the income-tax authorities has, however, submitted that the acts done and/or caused to have been, done by the respondent are well-justified and in accordance with law and the acts complained of are neither contrary to and/or inconsistent with the provisions of the Income-tax Act and the allegations in the writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors (Private) Limited case (supra) while making the proviso applicable retrospectively that Section 43B of the IT Act was introduced to curb the activities of those tax payers who did not discharge the statutory liability of payment of excise duty, provident fund, etc. for a long period of time but claimed deductions in that regard from their income on account of the liabilities to pay these amounts having been incurred by them in the relevant previous years. Thus, to cure the mischief, Section 43B was inserted. 23. However, when Section 43B was so worded it was not realized that it would cause hardship to those tax payers who had paid sales tax within statutory period prescribed for payment although the payment made by them did not fall within the relevant year. This was so because the same pertains to the last quarter of the relevant accounting year and could be paid only in the next quarter which fall in the next accounting year. Thus, even the assessee‟s who paid sales tax within the statutory period prescribed for its payment and prior to the filing of the income tax return were prevented from claiming legitimate deductions in respect of tax paid by them. This resulte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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