ESCORTS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The challenge in this writ petition is to a notice issued under section 154 of the Income-tax Act to the petitioner whereby the Commissioner of Income-tax seeks to withdraw the deduction which was allowed under section 43B of the Income-tax Act.

(2.) In respect of the assessment year 1985-86 the petitioner had claimed in appeal before the Commissioner of Income-tax that the Income-tax Officer ought not to have included in its. income the amounts collected by the petitioner by way of sales tax and disallowed the amount payable to the Sales Tax Authorities by the petitioner. At that time the Commissioner of Income-tax followed the decision of the Andhra Pradesh High Court reported as 173 I.T.R. 708 and held that as there was no contrary decision of the Delhi High Court he was bound by the observations of the Andhra Pradesh High Court and he directed that sum of sales tax which was payable though not actually paid should be allowed as a deduction under section 43 B. After this order was passed by the Commissioner of Income-tax in appeal, the Income- tax Act was amended and Explanation II was inserted and it was given retrospective effect from 1st April, 1984. It is thereafter that the present notice under section 154 has been issued seeking to withdraw the deduction which had been allowed by the Commissioner of Income-tax while deciding the appeal.

(3.) It is contended by the learned counsel for the petitioner that there are two views possible with regard to the interpretation of section 43 B and that Patna High Court has interpreted this provision to mean that even trough payment has not actually been made, the provisions of section 43 B are applicable.