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TMI Blog2000 (1) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... y had accrued in the relevant previous year in respect of these amounts. He, therefore, disallowed the assessee's claim of deduction, but at the same time remarked that the assessee would be entitled to deduction of these amounts in the subsequent years where the same were adjusted by way of excise duty and sales-tax liability. On assessee's appeal the learned Commissioner of Income-tax (Appeals) went into the detailed working. He found that the assessee was not adjusting the sales-tax collected by it or paid by it to the Profit Loss Account. During the year the assessee had collected a sum of ₹ 92,58,884 by way of sales-tax. Out of which, a sum of ₹ 71,76,790 had been credited toy way of sales-tax set off account. The assessee had also actually made payment of ₹ 25,76,362 during the year. After adjusting an amount of ₹ 1,13,980 relating to sales tax of earlier assessment years, the learned CIT(A) found that the assessee was entitled to a net deduction of ₹ 3,80,288 inasmuch as, the payments exceeded by that amount. In respect of excise duty, the learned CIT(A) found that the sum of ₹ 13,28,364 was in excess of excise duty payable. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the issue and pre-paid taxes could not be allowed as deduction. 4. The learned counsel for the assessee relied upon the order of the learned CIT(A). He stated that the view taken by the learned CIT(A) was well supported by the judgment of the ITAT Delhi Bench in the case of Modipon Ltd. v. IAC (1995) 52 TTJ (Delhi) 477. The case of the assessee was also supported by the judgment of the Gujarat High Court in Lakhanpal National Ltd.'s case (supra) and of the Delhi High Court reported in Sanghi Motors v. Union of India (1991) 187 ITR 703. He argued that these authorities were directly on the issue whereas various authorities relied upon by the learned departmental representative were not directly concerned with the subject matter. The learned counsel also pointed out that the assessee has not been allowed any deduction by the revenue in the subsequent assessment years on the basis of accrual method of accounting. The learned DR countered that ITAT Special Bench decision in KCP Ltd.'s case (supra) directly applied. 5. We have carefully considered the rival submissions. We shall begin by looking into various authorities cited before us. We find that in none of the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court judgment in the case of Sanghi Motors (supra). In that case the Petitioners filed a writ petition challenging the constitutionality of the provisions of section 43B. The Hon'ble High Court held that the special provisions of section 43B regulating the allowance of Tax, Duty, Cess or Fee only in the year of actual payment were neither unreasonable nor arbitrary. The learned counsel for the assessee argued that in this case the Hon'ble High Court have held that provisions of section 43B direct deductions of such payment only in the year of actual payment. On a reading of the judgment, we find that the question of allowability of any advance payment of taxes or pre-paid taxes on actual payment basis did not constitute subject matter of that writ petition and therefore, that judgment cannot be taken as an authority for the proposition that taxes paid in advance or pre-paid taxes for which liability is to be incurred in a subsequent year should nonetheless be allowed in the year of payment on actual payment basis. 7. The learned departmental representative has relied upon the judgment of the Hon'ble Andhra Pradesh High Court in the case of Srikakollu Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the amount relating to the previous year had been taken to Profit and Loss Account. The amount relating to the period beyond the previous year was taken to balance sheet as pre-paid taxes. The assessee, however, claimed deduction of all amounts under section 43B on actual payment basis. The Hon'ble Special Bench of the ITAT held that the provisions of section 43B had no relevance to the issue, that section only enable the ITO to disallow claim for deduction of taxes and other statutory levies which had not actually been paid. As against this, in the case of Modipon Ltd. (supra), the assessee had paid excise duty as advance by way of deposit. The case of the assessee was that having actually paid the amount to the excise department under a prescribed scheme/rules the assessee was in no way entitled to any refund. The amount paid was excise duty nothing else and therefore, allowable as a deduction under section 43B, the same having been actually paid. On these facts, the Delhi Tribunal held that excise duty which was deposited as per rule 173G of the Central Excise Rules, 1944, whether paid in advance or otherwise retained the character of excise duty and, therefore, covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force at all material times, any sum payable means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. The expression a sum for which the assessee incurred liability in the previous year needs emphasis. Unless the assessee incurred liability in the previous year, it does not become any sum payable and therefore section 43B would not have any application thereupon. 14. On a reading of the complex provisions of section 43B as a whole, we find that it cannot be pressed into service to claim a deduction otherwise not available to the assessee. In other words, the assessee must incur liability of the nature mentioned in various clauses in the first instance. Thereafter the year of allowability would be determined on the basis of the year of actual payment. However, in the cases of such as one before us, where actual payment may precede the incurrence of liability, the harmonious reading of the proviso would require the actual payment to be deemed in the year in which the amounts paid are adjusted towards liability. This is exactly what the Assessing Officer has done ..... X X X X Extracts X X X X X X X X Extracts X X X X
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