TMI Blog1988 (9) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... is payable before the end of April 1984 and therefore the sales-tax liability of the month of March was not payable in that month. This argument did not find favour with the ITO. He added an amount of Rs. 1,69,909 to the total income of the assessee as per P L a/c u/s. 43B of the Act. 3. The assessee took the matter in appeal to the CIT(A). The CIT(A) relying on the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 and in the case of Chowringhee Sales Bureau (P.) Ltd v. CIT [1973] 87 ITR 542 observed that whether the assessee is entitled to a particular deduction or not will depend upon the provisions of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter. Therefore, the fact that the assessee had not debited the amount as deduction in the P L a/c was not relevant. As regards the time available for payment again relying on the observations of the Supreme Court the CIT(A) held that under the mercantile system the liability that accrues during the year has to be debited to the P L a/c ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as discharged by the assessee in the month of April 1984. This was done in terms of the provisions of Goa, Daman and Diu Sales Tax Act and the rules framed thereunder and as per the practice followed all along by the assessee in the past. No debit on account of sales-tax was shown to the P L a/c. The sales-tax for the month of March 1984 became payable in April 1984 and was in fact paid in that month. Shri Gadgil argued that the CIT(A) grievously erred in not appreciating the implication of the Sales Tax Act and the manner in which the liability under that Act was being discharged. Shri Gadgil pressed his argument by relying on a decision of Andhra Pradesh High Court in the case of S. Subba Rao Co. v. Union of India [1988] 38 Taxman 272. He also relied on various decisions of the Tribunal on which he placed reliance before the CIT(A) and the details of which have been mentioned by the CIT(A) in para 1 of his order. He also referred to a decision of the Tribunal in M. V. Textiles v. Third ITO [1987] 23 ITD 523 (Bang.) where the scope of sec. 43B came up for consideration. 5. Shri Mahadeshwar for the department relied on para 4 of the CIT(A)'s order. He referred to Pyne's Judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Kedarnath Jute Mfg. Co. Ltd.'s case and Chowringhee Sales Bureau (P.) Ltd.'s case it is necessary to deal with these decisions to first determine whether the authorities of these judgments can be invoked to justify an addition that has been made by the ITO and sustained by the CIT(A). In Kedarnath Jute Mfg. Co. Ltd.'s case, the Supreme Court laid down the principle that whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating to the assessee and not on the view which the assessee might take of his rights, nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter. In that case, the Supreme Court held that the assessee was entitled to a deduction of a statutory liability irrespective of method of accounting if followed as soon as the taxing events viz. sales in that case took place. The judgment was delivered in an appeal by the assessee who was claiming deduction. In the present case on the one hand the assessee has not claimed any deduction of sales-tax and on the other hand, the assessee is claiming that he is maintaining the account of his sales-tax liability as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 1984 could not be disallowed in terms of sec. 43B since it was payable before the 25th day of the succeeding month. In respect of this last argument, the point taken by the assessee in the case before the Andhra Pradesh High Court was exactly the same as is agitated by the appellant before us. On this last contention, the Hon'ble Court observed that in order to apply the provisions of sec. 43B not only should the liability to pay the tax or duty be incurred in the accounting year but the amount also should be statutorily payable in the accounting year. Sec. 43B itself is clear to this extent. It refers to the 'sum payable' in clause (a) as well as in clause (b). If the Legislature intended it should have so provided that any sum for the payment of which liability was incurred by the assessee would not be allowed unless such sum was actually paid. Keeping in mind the object for which sec. 43B was enacted it is difficult to subscribe to the view that a routine application of that provision is called for in cases where the taxes and duties for the payment of which liability was incurred in the relevant assessment year were not statutorily payable in that assessment year. If und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an pay the tax before the due date. But the last date on which he is permitted to pay is to be taken as the date on which tax is payable. Sec. 43B in such a case was not applicable since the amount was not payable in the relevant previous year. This decision would also appear to support the case of the assessee. Since we have seen from the provisions of the relevant sales-tax that the amount of Rs. 16,909 representing the tax liability for the month of March became payable only in the month of April 1984. A decision to the same effect was given by the Cuttack Bench of the Tribunal in Kapoor Motor Engg. (P.) Ltd v. ITO [1987] 21 ITD 4. The Tribunal held that sec. 43B did not apply to the case where the assessee did not claim the impugned amount as deduction. Further, when the law permits the payment of tax some time after they are collected, then some amount was bound to remain unpaid on the date when the assessee closed its accounts. In this case, the Tribunal took notice of the decision of the Supreme Court in Chowringhee Sales Bureau (P.) Ltd.'s case. Shri Gadgil also relied on two other decisions of the Tribunal in ITO v. Thakersi Babubhai Co. [1986] 26 TTJ (Ahd.) 517. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a claim of deduction for excise duty. The court observed that the explanation makes clear that the assessee shall not be entitled to any deduction u/s. 43B in respect of such sum, in computing the income of the previous year in which such sum is actually paid by him, in case a deduction in respect of any such sum was allowed in any previous year prior to 1983. We fail to understand how even this decision supports the case of the department and against the assessee in the light of the facts of the present case. 10. We finally hold that there was no justification on the facts or in law for making addition of Rs. 1,69,909 as was done by the ITO. The amount was shown in the sales-tax account. It was not debited in the P L a/c. No provision for the amount was made. No claim for deduction was made. The amount represented sales-tax liability of the month of March 1984 payable in April 1984 as per provisions of Goa, Daman and Diu Sales Tax Act and the rules framed thereunder and as the sec. 43B could not be invoked on these facts to make an addition of this amount to the total income. 11. In the result, the appeal of the assessee is allowed and the order of the CIT(A) is reversed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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