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TMI Blog2021 (9) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... e of raw material used for the product. Rule 45(3) entitles the assessee to adjust or set off the amount in the return itself. It is a provision parallel to Sections 199 and 245 of the Income-tax Act creating a legal fiction. Therefore, this sum, which is subject to adjustment or set off, is a liability adjusted deeming actual payment by legal fiction. The Sales Tax Rules have allowed an incentive by way of adjustment of sales tax or in other words, the liability is being adjusted as actual payment. Section 43B of the Income-tax Act allows deduction on tax payable by the assessee. When the assessee purchases raw materials, it is liable to pay purchase tax on the purchase. An equivalent of this amount is adjusted towards the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - be treated to have been paid as a tax liability deductible under Section 43B of the Act. This was disallowed by the Assessing Officer by an order dated 21st February 1991. An appeal was preferred by petitioner under Section 216 of the Act. The CIT(A) by an order dated 8th July 1992 upheld the disallowance of ₹ 7,06,590/- by the Assessing Officer. Petitioner challenged the order of CIT(A) before ITAT. ITAT dismissed this issue in its order dated 1st January 2002 as not pressed for. Petitioner filed a miscellaneous application relating to this disallowance of ₹ 7,06,590/- under Section 43B of the Act, which also came to be rejected by ITAT vide its order dated 7th November 2002 without a hearing. 2. The fact that appellant wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at final hearing stage. In question no.1, the court has recorded whether the conclusion of the Tribunal that appellant had not pressed the ground relating to the disallowance under Section 43B of the Income Tax Act (hereinafter referred to as the said Act), is correct? Therefore, the court was aware that it was respondents case that it was not pressed for. Notwithstanding that the court still framed question no.2. Therefore, we are inclined to answer question no.2. 5. Section 43B reads as under: 43B:- 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, duty, cess or fee, by whatever name called, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials, the assessee has actually been reimbursed to that extent by the sales tax collected at the sale of the finished product. Therefore, it is presumed to be a deemed payment within the time to be included in the relevant assessment. Since the assessee was entitled to adjustment or set off, the amount of ₹ 7,06,590/- is a liability adjusted deeming actual payment by legal fiction. This adjustment, by legal fiction, is deemed to be an actual payment of the tax liability and is deductible under Section 43B of the Act. We find support for this view in a judgment of the Calcutta High Court in Commissioner of Income Tax Vs. National Standard Duncan Ltd. (2003) 260 ITR 97 (CAL) where the court held as under: Section 43B of the 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see on its purchase of raw material used for the product against which the sales tax has since been collected by the assessee on sale of the product concerned. Now it is to be seen whether the set off or adjustment amounts to deemed payment. In other words, whether this deemed payment is a payment of the liability contemplated under Section 43B of the Income-tax Act. Rule 41D of the Bombay Sales Tax Rules allowed incentive by way of exemption of sales tax to the extent of payment of sales tax on purchase of raw material used for the product. Rule 45(3) entitles the assessee to adjust or set off the amount in the return itself. It is a provision parallel to Sections 199 and 245 of the Income-tax Act creating a legal fiction. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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