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TMI Blog1989 (9) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 days from the end of the quarter. The assessee made payment by cheque on 7th May, 1984. The CIT(A) held that since the amount became payable on 7-5-1984, the same could not be validly disallowed by resort to section 43B of I.T. Act, 1961. He, therefore deleted the aforesaid disallowance of Rs. 21,580. The revenue has preferred this appeal against the said deletion of disallowance made by the CIT(A). 3. The learned Departmental Representative contended that in view of the specific provisions of section 43B, the liability in respect of any tax or duty can be allowed in the previous year in which such sum is actually paid by the assessee. The ITO had, therefore, rightly disallowed the aforesaid amount of Rs. 21,580, which remained unpaid at the end of relevant accounting year. He also invited our attention towards recent amendment made in the provisions of section 43B by the Finance Act, 1989 by which the following Explanation has been inserted with retrospective effect from 1-4-1984 : " Explanation 2 : For the purposes of clause (a), as in force at all material times, " any sum payable " means a sum for which the assessee incurred liability in the previous year even though suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that since the assessee in the present case had given a cheque for payment of sales tax of last quarter on 7th May, 1984, the disallowance of the aforesaid amount of sales tax of last quarter is apparently contrary to the object, spirit and intention with which the provisions of section 43B were inserted. 4.1 He further submitted that the aforesaid real legislative intention is apparent from the fact that the first proviso was added in section 43B by the Finance Act, 1987 clearly providing that in case the amount of any such government dues or tax is paid before the due date for furnishing the return of income u/s 139(1), no disallowance shall be made in respect of such amount under the main provisions of section 43B. He contended that the amendment made by Finance Act, 1989, merely clarifies that the words " any sum payable " appearing in clause (a) be defined to mean any sum, liability for which has been incurred by the taxpayer during the previous year irrespective of the date by which such sum is statutorily payable. By this amendment the effect of interpretation given by certain courts that in order to attract sec. 43B the amount payable in a particular year should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s depriving the Government of its dues while enjoying the benefit of non-payment. To curb such practices I propose to provide that irrespective of the method of accounting followed by the taxpayer, a statutory liability will be allowed as a deduction in computing the taxable profits only in the year and to the extent it is actually paid. " The relevant portion of the memorandum explaining the provisions in the Finance Bill 1983 are also worth quoting : " Disallowance of unpaid statutory liability : 59. Under the Income-tax Act, profits and gains of business and profession 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 purpose 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 taxpayers do not discharge their statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id before the time limit prescribed for submission of the return u/s 139(1) from the general enactment made for disallowance of government taxes or dues u/s 43B. The notes on clauses explaining the provisions of Finance Bill 1987 with regard to aforesaid insertion of the proviso is as under : " Clause 10 seeks to amend section 43B of the Income-tax Act relating to allowability of certain expenses only on actual payment. It is proposed to insert two provisos. The first proviso seeks to provide that the section shall not apply to any sum referred to in clause (a) if the sum is actually paid on or before the date on which the return of income is due to be furnished under sub-section (1) of section 139 for the previous year in which the liability to pay such sum was incurred. " The recent insertion of the new Explanation 2 in section 43B by the Finance Act, 1989 with retrospective effect from 1st day of April, 1984, does not in any manner affect the non-applicability of the main provisions of section 43B with regard to allowability of sales tax pertaining to last quarter, which has been duly paid to the state government before due date of furnishing the return u/s 139(1) of I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be applicable only from A.Y. 1988-89. Since the aforesaid proviso inserted by the Finance Act, 1987, merely clarifies the real legislative intention, the same should be made applicable ever since the provisions of sec. 43B was introduced. Such an interpretation will be perfectly in consonance with the object and spirit with which the provisions of section 43B and various amendments therein were introduced from time to time. 5.4 It may also be relevant to make useful references to various judgments of Hon'ble Supreme Court and some High Courts relating to interpretation of statutes in this regard : [1985] 156 ITR 323 at p. 39 [CIT v. Gotla (SC) ] " Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the Legislature from the language used. It is necessary to remember that language is at best an imperfect instrument for the expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law but in interpreting the relevant procedural provisions, fairness and justice should be the approach and even in a fiscal statute, equity should prevail, wherever language permits. " [1985] 156 ITR 585 at p. 603 [Shree Sajjan Mills Ltd. v. CIT (SC)] " The principle that fiscal statutes should be strictly construed does not rule out the application of the principles of reasonable construction to give effect to the purpose or intention of any particular provision as apparent from the scheme of the Act, with the assistance of such external aids as are permissible under the law. " [1981] 13l ITR 597 at pp. 608-609 [K.P. Varghese v. ITO (SC)] " Now, it is true that the speeches made by the members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. This is in accord wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of sales tax of last quarter within the time allowed as per the provisions of Gujarat Sales Tax Act and hence the assessee's case is not covered by the main provisions of sec. 43B but the same is apparently covered by the exceptions carved out by the Legislature itself in the first proviso to section 43B which permits grant of deduction of such sales tax liability provided the same has been deposited before the due date for furnishing the return of income u/s 139(1). 5.6 In view of aforesaid discussions we uphold the order passed by the CIT(A) directing the ITO to allow deduction in respect of the sum of Rs. 21,586 being the amount of sales tax payable for the last quarter, which was duly paid well before the due date for furnishing the return of income of the relevant previous year as prescribed under section 139(1). 6. In the result, the departmental appeal is dismissed. Per Shri K.R. Dixit, Judicial Member -- I agree with the conclusion of my learned Brother who has dealt with the above matter in considerable detail. However, I would like to add a few words. 2. The first proviso to sec. 43B had come into effect from 1-4-1988 and Explanation 2 although made with r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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