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TMI Blog2020 (9) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... onger res Integra for Constitutional validity of Section 43B, more particularly Clause (f) thereof, stands affirmed by the Hon'ble Apex Court in Union of India Ors. Exide Industries Limited Anr. [2020 (4) TMI 792 - SUPREME COURT] . Undisputedly, petitioner had not deposited the amount deducted as STT with the authorities, and it is not his case that the same stood paid back/returned to the person from whom it stood deducted. It is the admitted case of the petitioner that since the petitioner was adopting the mercantile system of accounting; he was not supposed to take any action. Even on this count, given law discussed above, more so Exide Industries Limited (supra). (supra) and Mcdowell [ 2009 (5) TMI 28 - SUPREME COURT] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hewitt (I) Pvt. Ltd. (2008) 305 ITR 324 (Delhi), the illegality and perversity in the order is sought to be argued. 3. Opposing the petition, Mrs. Archana Sinha, learned counsel for the Revenue seeks reliance upon a decision of the Hon'ble Apex Court in M/s Chowringhee Sales Bureau (P) Ltd. Versus C.I.T. West Bengal, (1973) 1 SCC 46. 4. Briefly facts set out are as under:- 5. For the assessment year 2006-07, petitioner filed its return of income showing total income at Nil. The return dated 17.01.2007 was selected for scrutiny through CASS. After issuance of due notice and compliance of procedural formalities, the Income Tax Officer vide order dated 26.12.2008 disallowed an amount of ₹ 17,87,530/- deducted as Security Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Clause (ii) of sub- section (1) of section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank [or a co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank] in accordance with the terms and conditions of the agreement governing such loan or advances, or (f) any sum payable by the assessee as an employer in lieu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession are computed in accordance with the method of accounting regularly employed by the assessee. Broadly stated, under the mercantile system of accounting, income and outgo are accounted for on the basis of accrual and not on the basis of actual disbursements or receipts. for the purposes of computation of profits and gains of business and profession, the Income-tax Act defines the word 'paid' to mean 'actually paid or incurred' according to the method of accounting on the basis of which the profits or gains are computed. 60. Several cases have come to notice where tax payers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intent, the Court categorically held Section 43B to be a mixed bag with new and dissimilar entries inserted therein, from time to time, to cater to different fiscal scenarios. It was an enactment designed to prevent fraud upon the Revenue, and as such required liberal construction in its favour. The Court also held that sub-section (1) of Section 145 explicitly provides the method of accounting is a prerogative falling in the domain of the assessee who is well within its rights to follow the mercantile system of accounting. In the mercantile system of accounting, the assessment of income is made based on the accrual of liability and not based on actual expenditure in lieu thereof. However, Section 43B is not a provision to place an embarg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieu of tax, duty, cess, bonus, commission etc. also arise in the present as per the mercantile system, but assessees used to defer payment thereof despite claiming deductions there against under the guise of the mercantile system of accounting. Resultantly, irrespective of the category of liability, such deductions were regulated by law under the aegis of Section 43B, keeping in mind the peculiar exigencies of fiscal affairs and underlying concerns of public Revenue. 14. Even on an earlier occasion, the Court affirmed the view of the Revenue that furnishing of a Bank Guarantee is not the same as making payment stipulated under Section 43B of the Act [Commissioner of Income Tax, Udaipur, Rajasthan vs. Mcdowell and Company Limited, (2009) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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