9911796707
TMI Blog2005 (1) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of manufacture and sale of synthetic chappal sheets and hawai chappals. For the assessment year 1986-87, it filed a return declaring an income of Rs. 6,27,940. The return was accompanied by copies of the profit and loss account and tax audit report. The Assessing Officer finalised the assessment under section 143(3) of the Income-tax Act, 1961 (for short "the Act"). While doing so, he disallowed the assessee's claim for deduction of Rs. 1,55,935 under section 43B of the Act. The appeal filed by the assessee was dismissed by the Commissioner of Income-tax (Appeals), Faridabad, in so far as it involved the claim for deduction under section 43B of the Act. On further appeal, the Tribunal reversed the orders of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's claim. As regards sales tax the scope of the proviso to section 43B inserted by the Finance Act, 1987, w.e.f. April 1, 1988, has been explained by their Lordships of the Patna High Court in the case of Jamshedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 70 as under: 'The object of section 43B of the Income-tax Act, 1961, was to refuse deduction to an assessee in respect of provident fund, etc., where the assessee does not discharge his statutory liability or where the assessee disputes his liability under the provisions of Sales-tax Act, etc. It was found impossible for an assessee to comply with section 43B as it stood in the year 1984, and to make it workable, amendments in section 43B were introduced by the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677. Their Lordships of the Supreme Court considered the scope of section 43B and held (head-note): "Section 43B of the Income-tax Act, 1961, was inserted with effect from April 1, 1984, to discourage taxpayers who did not discharge their statutory liability of payment of excise duty, employer's contribution to provident fund, etc., for long periods of time, but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year. After the insertion of section 43B, even if the assessee had regularly adopted the mercantile system of accounting, the amount of tax payable by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue intention of section 43B. Explanation 2 being retrospective, the first proviso has also to be so construed. Without the first proviso, Explanation 2 would not obviate the hardship or the unintended consequences of section 43B. The proviso supplies an obvious omission. But for this proviso the ambit of section 43B becomes unduly wide bringing within its scope those payments which were not intended to be prohibited from the category of permissible deductions. The first proviso to section 43B, therefore, has to be treated as retrospective." In view of the law laid down by the Supreme Court, the question referred by the Tribunal is answered in favour of the assessee and against the Revenue. The reference is disposed of in the manner indic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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