9911796707
TMI Blog2008 (2) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... yments made by the assessee. In the accounting year relevant for the assessment year 1994-95, the assessee which was following the mercantile system of accounting, made additional payment of Rs.23 lakhs towards sales tax payable for April 1994. Since it was specifically stated in the statement of accounts accompanying the return that the amount paid was towards sales tax payable for April 1994, the Assessing Officer disallowed the claim and computed tax liability. The assessee objected against disallowance under Section 143 (1)(a) of the Act by filing a rectification application under Section 154 of the Act which was rejected by the Assessing Officer. In the appeal filed against this order, the CIT (Appeals) allowed the claim holding that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by the assessee by way of tax, duty, cess or fee, by whatever name called, 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 employees, or (c)any sum referred to 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 term loan fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability of the assessee is an allowable deduction in the computation of income from business by virtue of Section 29 read with Section 37(1) of the Income Tax Act. Among other things it is stated in Section 145 of the Income Tax Act that income chargeable under the head "profits and gains of business or profession" should be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The assessee is admittedly following the mercantile system of accounting and therefore, sales tax liability like any other liability should be claimed and allowed on mercantile basis. In other words, liability of the relevant previous year only should be allowed as a deduction. Assessee itself admitted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the end of the relevant previous year or at least before date of filing of the return. Therefore, Section 43B is only supplementary to Section 145 and it is only an additional condition for allowance of deductions otherwise allowable under the other provisions of the Act. The scheme of payment of sales tax under the Sales Tax Act of the State is to remit tax due for every month on or before the 10th of the succeeding month. The only exception to this is the payment of advance tax for the last month of the financial year on or before 30th of March. Therefore, the liability towards sales tax for an assessee is the tax payable along with monthly returns and final return and the tax otherwise assessed, demanded and payable by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under Section 29 read with Section 37(1) and Section 145 of the Income Tax Act. As already held, Section 43B in itself does not help the assessee to claim deduction as it is only an additional condition for allowing deduction which is otherwise admissible under the provisions of the Act. 4. The next question to be considered is whether the Assessing Officer was justified in disallowing the claim and computing tax liability under Section 143(1)(a) of the Act. Even though the C.I.T.(Appeals) and the Tribunal held that the question whether the amount payable by the assessee in the previous year being sales tax liability is a debatable issue which cannot be decided in proceedings under Section 143(1)(a), we are unable to uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In fact, under the scheme of Sales Tax Act in the computation of liability for the previous year, the amount paid will be just refunded to the assessee as excess tax paid for adjustment towards liability for next year. Therefore, even if the assessee's claim was allowed by mistake by the Officer, the amount is assessable in the next year based on refund as provided under Section 41(1) of the Income Tax Act. Therefore, we are of the view that the Tribunal clearly committed an error in confirming the first appellate authority's order allowing petitioner's claim. The appeal is therefore allowed vacating the order of the Tribunal and confirming the order of the officer rejecting application to rectify proceedings under Section 143(1)(a) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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