9911796707
TMI Blog1987 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... ount the assessee had disclosed sales of Rs. 97,51,851. A sum of Rs. 6,86,434 was claimed as deduction by way of sales-tax. The balance sheet as at 13th April, 1984 showed outstanding sales-tax liability of Rs. 2,24,333. The CIT also found that the ITO did not call for the details and did not make any enquiry with a view to considering the applicability of s. 43B. This lack of enquiry on the part of the ITO rendered the order erroneous in so far as it was prejudicial to the interest of the Revenue. 3. A show cause notice under s. 263 was issued to the assessee. Appearance was put in before the CIT on behalf of the assessee. It was conceded that a sum of Rs. 2,24,333 remained outstanding by way of sales-tax liability as on 13th April, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to Rs. 15,263.82. As this amount has been credited to the partners' capital account and represents the excess collection of sales-tax, the assessee, is clearly not entitled to claim any deduction in respect of this amount and, therefore, this amount is liable to be added back to the income of the assessee. So, to this extent the order of the CIT holding that the assessment framed by the ITO is erroneous in so far as it is prejudicial to the interest of the Revenue must be upheld. 6. Shri Poddar submitted before us that the balance amount of Rs. 2,09,070 represented sales-tax liability in respect of which the assessee is entitled to deduction in computation of income for the asst. yr. 1984-85. It was submitted that s. 43B is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rter. The assessee was required to pay sales-tax before submitting the return for that quarter. According to Shri Poddar, though the liability arose or became due before the end of the accounting year, it was to be discharged after the expiry of the accounting year within 30 days from the end of the last day of the accounting year. Thus, according to Shri Poddar, cl. (a) of s. 43B which is relevant for the purpose of this case is not at all applicable in the case of the assessee. In support of the contention that deduction is allowable in respect of sales-tax liability in the assessment year under consideration so far as the amount of Rs. 2,09,070 is concerned, reliance has been placed on the decision of the Cochin Bench of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter. The assessee firm is required to furnish quarterly returns under the aforesaid Act and these returns have to be filed quarterly within 30 days from the expiry of each quarter. So, for the quarter ending on 13th April, 1984, the assessee was required to furnish quarterly return within 30 days from that date. Before filing the return, the assessee had to pay the amount of sales-tax due from it. So, these provisions clearly go to show that for the quarter ending on 13th April, 1984, the assessee was required to pay sales-tax within 30 days from the end of that quarter. Therefore, though the sales-tax liability became due during the accounting year relevant to the asst. yr. 1984-85, it was required to be discharged by the assessee after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be discharged by the assessee within 30 days from the end of the relevant accounting year. It cannot be said that the assessee did not discharge its statutory liability in the matter of payment of sales-tax dues. As a matter of fact, the assessee paid sales-tax within the period prescribed under the law and thus discharged its statutory liability. It may be pointed out that s. 43B was inserted by the Finance Act, 1983 w.e.f. 1st April, 1984. The memorandum explaining the provisions in the Finance Bill, 1983 states that under the IT 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, incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities even though they claimed those liabilities as deduction on the ground that they maintained accounts on mercantile or accrual basis. Sec. 43B was intended to apply to cases where the statutory liability remained undischarged though the assessee in such a case claimed deduction on the ground that he maintained his accounts on mercantile or accrual basis. Keeping in view the object for enacting s. 43B, we have no doubt in our mind that the provisions of s. 43B are not applicable to a case where the statutory liability has been discharged by the assessee within the period prescribed under the law. If in case of such a statutory liability, the assessee claimed deduction on the ground that he maintains accounts on mercantile basis s. 43B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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