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S.43B -Un-necessary litigation by revenue an appeal before the Supreme Court on an issue which was well settled. S.43B must be omitted from the Income-tax Act

Income Tax - By: - CA DEV KUMAR KOTHARI - Dated:- 12-12-2017 - Links and references: Section 43B of Income-tax Act, 1961. Commissioner of Income Tax II Versus M/s Modipon Ltd. 2017 (11) TMI 1429 - SUPREME COURT OF INDIA CK Gangadharan & Anr. Versus Commissioner of Income Tax, Cochin 2008 (7) TMI 10 - SUPREME COURT Commissioner of Income Tax Versus M/s Excel Industries Ltd. and Mafatlal Industries P. Ltd. 2013 (10) TMI 324 - SUPREME COURT And various judgments referred to in above judgments. .....

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, whether debited in P & L account or not should be claimed under S. 43B. It is also important that evidence of actual payment was also required to be filed with ROI till few years back and not such evidences are to be produced by assessee, as and when AO require. Therefore a payment actually made say on 31.03.2015 whether on accrual, or as advance or under protest is eligible for claim for deduction only in assessment year 2015-16 for which relevant previous year is year ended 31.03.15 duri .....

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n accepted by tax authorities. Well settled position: The above position is well settled and generally accepted by AO. In some years and in some cases disputes arose and in appeals the same were allowed in the year of actual payment by CIT(A) or ITAT and matter attained finality. Case of Modipon - Supreme Courts observations about settled position, yet question considered on merit: Paragraph 8 of judgment with highlights is reproduced below: 8. We have considered the submissions made on behalf o .....

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eels that the approach of the Supreme Court as adopted in the case of Modipon need to be reviewed for the following reasons: a. The clear provision is clear that deduction shall be allowed only on actual payment and the assessee claimed only on that basis. If an advance payment is not claimed in year of payment then it cannot be allowed in other year. Therefore there was really no question of law. b.There was not an issue which affect revenue over a period of time- a deduction allowed on actual .....

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ity in favour of assesee. For example: A. In CK Gangadharan & Anr. Versus Commissioner of Income Tax, Cochin 2008 (7) TMI 10 - SUPREME COURT ( larger bench of three judges bench) had observed and held inter alia following (with highlights added): Quote: 1. By order dated 13.3.2008, a reference was made to larger Bench and that is how these cases are before us. The order, of reference, inter-alia, reads as follows: In view of the aforesaid position, we are of the opinion that matter requires .....

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ing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts. B. In Commissioner of Income Tax Versus M/s Excel Industries Ltd. and Mafatlal Industries P. Ltd. 2013 (10) TMI 324 - SUPREME COURT larger bench of three judges of the Supreme Court observed and held and as follows: Quote: 32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax.There is no disp .....

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e no judgments of many of other High Courts, means that the revenue has accepted the issue in favour of assessee or in some cases assessee might have accepted adverse decision because sum was allowed in next year. g. In fact in most of cases the position of deduction allowable in year of actual payment was accepted at assessment stage and there was no dispute. In view of the two judgments of three judges of the Supreme Court, discussed earlier and other judgments referred to therein, it was not .....

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use of different situations prevailing in two cases. Suppose, if in this case Supreme Court had decided the issue against assessee it would have created lot of problems by rendering large number of assessment and appeal orders wrong because generally actual payments made have been allowed under section 43B. Section 43B deserves to be deleted: It is found that generally payments which are covered by S.43B are actually made though some time there may be delay due to business contingencies. Non-pay .....

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y cases when though business failed, but liabilities were discharged by selling business assets. From empirical studies it is noticed that so far tax collection is concerned, the provisions of section 43B has not made any positive impact. In fact in many situations taxpayers have got additional tax advantages by paying sums covered by S.43B in advance or by delaying payments. Such saving of tax in one year is not a saving when considered for two or more years. Advantages of S.43B can be obtained .....

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x department and assessee. It is also not tax friendly for collection of revenue. In fact if properly used by assessee, S.43B can be used advantageously by assessee and can cause lot of disadvantages to revenue. The Tax policy is that most of Return of Income are accepted u.s. 143.1 as per self-assessment. In such situation adjustments u.s. 43B can be a reason for scrutiny, reassessment, revision etc. Which only causes litigation but without any meaningful advantage for the revenue. Therefore, S .....

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