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TMI Blog1999 (8) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... id. The matter was taken in the appeal. The appeal was dismissed. In further appeal taken before the Tribunal, the Tribunal came to the conclusion that the assessee was entitled to deduction in the previous year in which the sales tax was collected and not in the year in which payment was actually made. The appeal was allowed. It is in these circumstances the revenue submitted an application for formulating a question of law. It was submitted that the question of law does arise and this be referred so that the answer be given to the question, i.e., as to whether the deduction was permissible only in the previous year in which the tax was actually paid or this was permissible in the relevant assessment year in which the assessment was made. The question of law which has been referred is being reproduced below : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the addition of ₹ 72,745 for the assessment year 1984-85 and ₹ 7,10,765 for the assessment year 1985-86 made by the Assessing Officer by invoking the provisions of section 43B of the Income-tax Act, 1961 ? 3. Before noticing the submissions made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now be noticed. 7. Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 is the first authority on which reliance is being placed. In this case, the assessee-company followed the mercantile system of accounting. It incurred a liability of ₹ 1,49,776 on account of sales tax determined to be payable by the sales tax authorities on the sales made by it during the calendar year 1954, the previous year relevant to the assessemnt year 1955-56. The sales tax demand was raised during the pendency of the income-tax assessment for that year. The ITO rejected the claim of the assessee for deduction of that amount on the ground : (i )that the assessee had contested the liability in appeals, and (ii)that it had made no provision in its books with regard to the payment of that amount. The departmental appeals were preferred. The assessee was unsucce- ssful. When the matter was taken up by the Supreme Court of India, the decision given by the High Court and the income-tax authorities was reversed. It was observed that the assessee who was maintaining accounts on the mercantile system was fully justified in claiming deduc- tion of the sum of ₹ 1,49,776, being the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee who maintains accounts on mercantile system is entitled to deduction of his estimated liability to sales tax, even though they had not been paid to the sales tax authorities. This decision given by the Calcutta High Court follows what was said by the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. s case (supra) and also Chowringhee Sales Bureau (P.) Ltd. s case (supra). 11. The other authority which is being referred to in Indian Carbon Co. v. IAC [1993] 200 ITR 759 (Gauhati). The assessment year was 1984-85. The IAC while making assessment of the tax for the assessment year 1984-85 added a sum of ₹ 21,98,555 stating that the amount payable under the Sales Tax and the Central Sales Tax remained to be paid up to 30-6-1983 and as such, section 43B would be attracted and the amount would be added back. The amount of sales tax did appear in the balance sheet on the liability side of the company. The argument raised was that section 43B of the Act shall apply only when an assessee claims deduction in respect of any sum payable by the assessee by way of tax or duty payable under any law for the time being in force and, therefore, the IAC could not make an order for addition. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1968-69. In giving this decision, the Supreme Court of India followed earlier decision given in Kedarnath Jute Mfg. Co. Ltd. s case (supra). Another decision which has been relied upon is Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677/ 91 Taxman 205 (SC). This decision deals with section 43B. A perusal of the above decision would indicate that following propositions of law were laid down : (i )that section 43B was inserted with effect from 1-4-1984 to discourage taxpayers who did not discharge their statutory liability of payment of excise duty, employer s contribution to provident fund, etc., for long periods of time, but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous years; (ii)that after the insertion of section 43B, even if the assessee had regularly adopted the mercantile system of accounting, the amount of tax payable by the assessee could be deducted only in the year in which the sum was actually paid and not in the year in which the assessee incurred the liability to pay the tax. However, an assessee who had collected sales tax in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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