TMI Blog2011 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Mr. Sanjoy Bhowmick, Mr. C. S. Das. For the Respondent: Md. Nizamuddin. Bhaskar Bhattacharya, J.: This appeal under Section 260A of the Income-tax Act, 1961 is at the instance of an assessee and is directed against an order dated August 29, 2003, passed by the Income-tax Appellate Tribunal, E Bench, Kolkata, in Income-tax (Appeal) bearing ITA Nos.787 and 813/Cal/2000 for the Assessment Year 1996-97 and thereby dismissing the appeal preferred by the assessee. Being dissatisfied, the assessee has come up with the present appeal. A Division Bench of this Court formulated the following four substantial questions of law for the purpose of disposal of this appeal: i) Whether on a true and proper interpretation of Section 43B of the Income Tax Act, 1961, the appellant was entitled to deduction of the excise duty of Rs.322.46 lacs actually paid by it during the previous year relevant to the assessment year 1996-97 and the Tribunal was justified in law in disallowing the deduction on the ground that liability for payment of the said amount was incurred not in the assessment year 1997-97 but in the subsequent assessment year ii) Whether in interpreting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the said amount actually paid by it during the previous year ending on March 31, 1996 in its assessment for the Assessment Year 1996-97 by taking aid of the provisions of Section 43B of the Act. c) The Assessing Officer, however, disallowed the claim of the appellant for deduction of the said amount on the ground that the liability for the said amount was not incurred during the previous year relevant to the Assessment Year 1996-97. The Assessing Officer in his order, however, wrongly mentioned the aforesaid amount as Rs.3 crore instead of the correct figure of Rs.322.46 lakh. d) Being dissatisfied, the appellant preferred an appeal before the Commissioner of Income-tax (Appeals) and the Commissioner of Income-tax (Appeals) by an order dated 28th March, 2000 allowed the claim of the appellant for deduction of excise duty but upheld the action of the Assessing Officer in respect of other points involved in the said appeal. e) Being dissatisfied, the appellant preferred an appeal before the Income-tax Appellate Tribunal against the other findings of the Commissioner of Income-tax (Appeals), while the Department preferred an appeal before the Tribunal against the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in computing the income referred to in section 28 of that previous year in which sum is actually paid by him. Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) or clause (e) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return 694a : Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36 and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date. Explanation [1] : For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablished under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); (c) "State industrial investment corporation" means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and approved by the Central Government under clause (viii) of sub-section (1) of section 36. After hearing the learned counsel for the parties and after going through the aforesaid provisions including the Explanation 2 added thereto, we find that the requirement of the provision contained in Section 43B (a) of the Act is that the assessee must have actually paid the amount as well as incurred liability in the previous year for the payment even though such sum might not have been payable within that year under the relevant law. In the case before us, the assessee has undoubtedly paid the duty in the previous year and such payment was made consequent upon the liability incurred in that very year but in view of the fact that it follows the mercantile system of accounting, the amount is legally payable in the next ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very operation of this section. The interpretation given by these Courts revolves around the use of the words 'any sum payable'. The interpretation given to these words is that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. This is against the legislative intent and it is, therefore, proposed, by way of a clarificatory amendment and for removal of doubts, that the words 'any sum payable' be defined to mean any sum, liability for which has been incurred by the taxpayer during the previous year irrespective of the date by which such sum is statutorily payable. This amendment will take effect from April 1, 1984. While interpreting Section 43-B without the first proviso some of the High Courts, in order to prevent undue hardship to the assessee, had taken, the view that Section 43-B would not be attracted unless the sum payable by the assessee by way of tax, duty, cess or fee was payable in the same accounting year. If the tax was payable in the next accounting year, Section 43-B would not be attracted. This was done in order to prevent any undue hardship to assessees such as the ones before us. The memoran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of this Section. The interpretation given by these Courts revolves around the use of the words 'any sum payable'. The interpretation given to these words is that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. Thus, the sales tax in respect of sales made in the last quarter was held to be totally outside the purview of Section 43-B since the same is not statutorily payable in the financial year to which it relates. This is against the legislative intent and, therefore, by way of inserting an Explanation, it has been clarified that the words 'any sum payable' shall mean any sum, liability for which has been incurred by the taxpayer during the previous year irrespective of the date by which such sum is statutorily payable....." The departmental understanding also appears to be that Section 43-B, the proviso and Explanation 2 have to be read together as expressing the true intention of Section 43-B. Explanation 2 has been expressly made retrospective. The first proviso, however, cannot be isolated from Explanation 2 and the main body of Section 43-B. Without the first proviso, Explanation 2 would not obvi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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