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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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as to very careful to claim deduction of all such sums actually paid in previous year relevant to the assessment year. If a sum actually paid in say first year is not claimed, then it will not be allowed in second or any other year. Therefore, from the beginning of the S.43B that is assessment year 1984-85 the author had always suggested that all actual payments , governed by S.43B ,made within the previous year whether on accrual, or in advance or under protest or under some other circumstances .....

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ng which sum was actually paid whether debited in P & L account of PYE 31.03.15 or not. Adjustments required under section 43B: From the beginning of S.43B author had advised to make the following adjustments under section 43B: To disallow a. Sums debited in P & L account but not actually paid during previous year. b. Sums claimed in earlier year on actual payment basis, but debited in P & L account. To allow: a. Sums actually paid during the previous year against old un-allowed liab .....

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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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he Revenue cannot be shut out from the present proceedings merely because of its acceptance of the practice of accounting adopted by the assessee or its acceptance of the decision of the two High Courts in question. An adjudication of the question(s) arising cannot be refused merely on the above basis. We will, therefore, have to proceed to answer the merits of the challenge made by the Revenue in the present appeals. Approach of the Supreme Court need to be reviewed: With great respect author f .....

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payment basis ( even advance orunder protest payment) get reversed in subsequent year when such sum is debited to P & L account on accrual basis. Therefore there was no adverse impact on revenue if two years are considered. c. The issue involved only had timing difference about deduction and it cannot be called an issue having adverse impact on revenue repeatedly. A deduction allowed in first year get reversed, generally in next year. Therefore, there was not much importance of the issue. d. .....

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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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d accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assesses, without just cause. Registry is directed to place the papers before the Hon'ble Chief Justice of India for appropriate orders. xxxx 13. In answering the reference, we hold that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for do .....

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ute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, there .....

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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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to the revenue. Fortunately, the Supreme Court has confirmed judgments of High Court. Judges being human being, it is very well known that many times judgment depends on how the case is presented by counsels and what type of approach, thinking and mood prevailed in minds of judges when they decided the issue. Delivering of judgment is not totally scientific and result cannot always be similar. We find that even the same judge may decide an issue differently, though on same facts and law but beca .....

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ment of such sums have serious repercussion on business like workmen s unrest, loss of goodwill, additional liability by way of late payment charges, interest, penalty and prosecutions etc. There are other authorities to look after that such payments are made by business. For example for dues to or related with workers there are other authorities and unions, for banks and financial institution they have to be careful for timely recovery, in any case they hold security and mechanism for recovery, .....

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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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