COMMISSIONER OF INCOME TAX Vs. SUMERMAL GOPICHAND

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following question of law, arising out of the order dated February 23, 1990, of the Tribunal, passed in appeal ITA No. 639/Ind. of 1987, on an application having been made to the Tribunal by the Revenue under Section 256(1) of the Income-tax Act, 1961 ;

(2.) THE respondent-assessee was assessed to income-tax for the year 1985-86, previous year ending Diwali, 1984. THE assessee observed the mercantile system of accounting and claimed deduction on account of sales tax in the sum of Rs. 43,134, krishi tax in the sum of Rs. 2,953, entry-tax in the sum of Rs. 103 and nirashrit tax in the sum of Rs. 643 : thus, a total sum of Rs. 46,833. Out of the above claimed deductions, a sum of Rs. 40,453 related to the last quarter of sales tax which had fallen due for payment on Diwali, 1984, but was payable within 30 days from the close of the accounting year. However, the Income-tax Officer on an interpretation of Section 43B of the Act, held that the assessee was not entitled to deduction of the entire amount of Rs. 46,833, since it had not actually been paid within the accounting year.

(3.) LATER, a proviso was added by the Finance Act, 1987, with effect from April 1, 1988, to carve out an exception to permit deduction where a sum referred to in the said section was actually paid by the assesses before the due date applicable in the case for furnishing the return of income under Sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment was furnished by the assessee along with such return. With a view to obviate any confusion about the incurring of the liability in the previous year, Explanation 2 was inserted by the Finance Act, 1989, with retrospective effect from 1st April, 1984, the date on which Section 43B had been inserted, to clarify that any sum payable within the meaning of Clause (a) of Section 43B would mean a sum for which the assessee incurred liability in the previous year, even though such sum might not have been payable within that year under the relevant law. The purpose was obviously to make provision for cases where the relevant law permitted time for deposit of the amount beyond the previous year in respect of the liability incurred during the accounting year of the assessee.