COMMISSIONER OF INCOME TAX Vs. CHANDULAL VENICHAND

JUDGEMENT

(1.) THE Tribunal has referred the following question for our opinion under S. 256(1) of the IT Act, 1961 (hereinafter referred to as 'the Act') :

(2.) SIMILAR question is referred in number of other subsequent matters. For the purpose of this reference, we take the facts from the order passed by the Tribunal. The assessee M/s Chandulal Venichand filed a return for the total income of Rs. 41,210. The return was filed on 20th March, 1986. During the assessment proceedings, it was noticed that sales tax liability of the assessee was Rs. 4,18,302 (Rs. 3,80,272 sales tax liability + Rs. 38,030 surcharge). After drawing the attention of the assessee, the said amount was added in the total income of the assessee in view of s. 43B of the Act and the assessee was directed to pay tax on income of Rs. 4,63,100. Against that order, the assessee preferred an appeal before the CIT. That appeal was partly allowed. However, the contention raised by the assessee that Rs. 4,18,302 representing unpaid sales tax liability should not be included under S. 43B of the Act was rejected. Against that order, the assessee preferred an appeal before the Tribunal. The Tribunal heard the said appeal along with other two appeals wherein question of interpretation of S. 43B of the Act was involved. It was pointed out to the Tribunal that all the three assessees were maintaining accounts on mercantile basis. All of them have separate sales tax accounts in which sales tax deducted from the parties is credited and sales tax paid to the Government is debited and the balance amount is taken directly to the balance sheet and is not taken to the profit and loss account. After considering various contentions raised by the parties, and the decisions cited at the Bar, the Tribunal held that, as far as sales tax liability in respect of last quarter was concerned, the said liability would be allowable deduction for the asst. yrs. 1984 85 to 1987 88 provided the assessee establishes that the liability was discharged by actual payment before the due date applicable in his case for furnishing the return of income under S. 139(1) in respect of the relevant previous year in which the liability had been incurred. The Tribunal negatived the contention of the Revenue that proviso to S. 43B of the Act should not be given any retrospective effect and that the Tribunal should follow the decision of the Special Bench of the Tribunal at Delhi in the case of Rishi Roop Chemical Co. vs. ITO (1991) 39 TTJ (Del) (SB) 660 : (1991) 36 ITD 25 (Del) (SB), by holding that the Ahmedabad Bench has consistently taken a view that, if the assessee has paid the amount in question before the due date applicable in his case for furnishing the return of income under S. 139(1) of the Act, the deduction in respect of liability should be allowed and the bar contained in S. 43B would not be applicable. The Tribunal further observed that various other High Courts have also taken the same view. Hence, at instance of the Revenue, this reference.

(3.) THE objects and purposes of inserting the said S. 43B of the Act, as per the Budget Speech of the Finance Minister for the year 1983 84, which are reproduced in (1983) 33 CTR (TLT) 1 at 4 : (1983) 140 ITR (St) 31, are as under :