TMI Blog2006 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable thereto. We are in respectful agreement with the aforesaid ratio. Therefore, if we look at the direct context in which the provision has been enacted, there is no difficulty in reaching the conclusion that if the principal liability of tax which is otherwise allowable u/s 37 of the Act of 1961 shall be allowed as deduction and interest thereon becomes part of it. We make it clear that it is not every liability that has been made subject to the provisions of section 43B. Section 43B is restricted to various liabilities in respect of which provision has been made. It is pertinent to notice that section 43B is not a charging section which has to be strictly construed. The restriction on claim to deduction envisaged u/s 43B is for computing the total taxable income and is part of the machinery provisions for effective implementation of the taxing statute. As the decision in Shantilal Mehta's case[ 1998 (5) TMI 25 - SUPREME COURT] was rendered in the context of the special provisions of the Act of 1992 for fixing priorities of certain liabilities, incurred during the specified period only, its ratio does not govern the case, where restriction on allowability of a claim to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1961? 3. Learned counsel for the assessee contended that the tax, interest and penalty under any fiscal statute are distinct and have different connnotation. For creating demand of either of them, separate charging provision is needed and no liability is created independent of statutory provision. Levy and collection of tax has to be authorised by law and refund and collection of interest on delayed payment of tax is also required to be authorised by law. 4. Section 43B(a) in its plain and unambiguous terms puts a condition only in respect of tax, duty, fee or cess that the same is paid in terms of section 43B on or before the statutory time. Failure to make payment of tax, duty, cess or fee which is otherwise deductible in terms of section 43B within the statutory period would forfeit the claim of deduction on such accrued liability on account of levy of tax, duty, cess or fee under section 37 only on the basis of accrual notwithstanding the assessee follows the mercantile system of accounting or cash system of accounting. In support of his contention, he placed reliance on the following cases: CIT v. Orient Beverages Ltd. [2001] 247 ITR 230 (Cal); Russel Properties P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances; or (f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee; Shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. 10. We are not concerned with the proviso for the present controversy, so we are not referring to it nor we are concerned with the liability arising under the Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered different from interest or penalty nor that in all circumstances, they are to be considered to be one. This principle is so well established as not to need any clarification on this aspect of the matter. The parties have also not joined any issue. Therefore, the crucial question that begs answer is whether the expression tax, duty, cess or fee used in clause (a) of section 43B has to be construed in a wider sense to include other charges leviable on any assessee as incidental or ancillary charges to effectually levy and collect tax than the tax proper leviable under the charging provision of the taxing statute. Apart from this, it is also essential to consider in the context of section 43B as to what is the real nature of interest chargeable on late payment of tax. 16. In common parlance, interest is liability that arises by way of compensation or service charge for use of somebody else's money for one's own use. 17. Any expression in any statues cannot be used in isolation without reference to the context in which the particular word or phrase has been used. Lord Allen in his book Law in the Making has stated that the words are meaningless in isolation and their co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting is indispensable property to ascertain a meaning. In saying that a verbal expression is plain or unambiguous, we mean little more than that we are convinced that virtually anyone competent to understand it and desiring fairly and impartially to ascertain its signification, would attribute to the expression in its context a meaning such as the one we derive, rather than any other; and would consider any different meaning, by comparison, strained or far fetched, or unusual or unlikely. ...Implicit in the finding of a plain, clear meaning of an expression in its context, is a finding that such meaning is rational and 'makes sense' in that context. 25. Maxwell while referring to Heydon's case [1584] 3 Co. Rep. 7a: in his book Maxwell on the Interpretation of Statutes has said that: In Heydon's case [1584] 3 Co. Rep. 7a: it was resolved by the Barons of the Exchequer 'that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law), four things are to be discerned and considered; (1st) what was the common law before the making of the Act. (2nd) What was the mischief and defect for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Relating to Transactions in Securities) Act, 1992. The question that had arisen before the court was whether the expression tax under section 11(2)(a) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, would include interest or penalty as well for the purpose of claiming priority in regard to its payment or other liabilities to be distributed by the Special Court in regarding to certain transactions. Significantly, while answering the question, for the purpose of section 11(2)(a), the court excluded the interest accrued on the tax due from the value of priorities. The hon'ble Supreme Court also said that the meaning of the words taxes due will ultimately depend upon the context in which these words are used. It would be apposite to note here that with a view to ensuring speedy recovery of huge sums of money diverted by brokers from banks and financial institutions by irregular transactions in Government and other securities during the period April 1, 1991, to June 6, 1992, the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, was enacted, therefore, the Special Court was to examine the tax liability in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. In the same manner, the liabilities to banks and financial institutions in section 11(2)(b) are also liabilities pertaining to the statutory period. The court further concluded that every kind of tax liability of the notified person for any other period is not covered by section 11 (2)(a), although the liability may continue to be the liability of the notified person. Such tax liability may be discharged either under the directions of the Special Court, under section 11(2)(c) or the taxing authority may recover the same from any subsequently acquired property of a notified person or in any other manner from the notified person in accordance with law. The priority however, which is given under section 11(2)(a) to such tax liability only covers such liability for the period April 1, 1991, to June 6, 1992. While deciding question No.5, the court has reached its conclusion for the purpose of section 11(2)(a) only. The court held that the Special Court after examining various authorities in paragraphs 51 to 70 of his judgment, has come to the conclusion that neither penalty nor interest can be considered as tax under section 11(2)(a). We agree with the reasoning and conclusion draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess and interest accrued thereon is considered as part and parcel of tax liability for the purpose of its allowability, for the purpose of section 43B, which is an ancillary provision laying down a condition for allowing deduction on account of tax liability, a different construction cannot be placed on the term tax, duty, fee or cess all various species of tax. 34. We are fortified in our view by the decision of this court in the case of Mewar Motors v. CIT reported in [2003] 260 ITR 218. While considering the provisions of section 43B of the Act, this court opined that the object of section 43B of the Act of 1961 is to curb the activities of those taxpayers who do not discharge their statutory liability of payment of sales tax or excise duty for long periods, but claim deduction in that regard from the income on the ground that the liability to pay this amount has been incurred by them in the relevant previous year. The interest paid is part of the sales tax. The interest payable to the Sales Tax Department is also tax and the provisions of section 43B of the Act are applicable thereto. We are in respectful agreement with the aforesaid ratio. 35. Therefore, if we look at the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction on account of liability arising for tax, duty, cess or fee was not there. Therefore, this judgment is of a little value in considering the provisions of section 43B of the Act. 40. Learned counsel for the appellant has also placed reliance on a series of decisions of the Calcutta High Court in the case of CIT v. Padmavati Raje Cotton Mills Ltd. reported in [1999] 239 ITR 355, CIT v. Orient Beverages Ltd. reported in [2001] 247 ITR 230 and CIT v. E.L. Properties P. Ltd. reported in [2001] 248 ITR 14. 41. These cases have been decided by relying on the decision of Hindustan Motors Ltd. v. CIT reported in [1996] 218 ITR 450 (Cal) and the earlier decision of the Calcutta High Court in Russel Properties P. Ltd. [1982] 137 ITR 358. The latter decision, we have noticed above was rendered for the period prior to the insertion of section 43B, hence of little help. 42. Hindustan Motors Ltd. [1996] 218 ITR 450 (Cal) relates to levy of interest under the Excise Act for keeping goods in the warehouse beyond the free period. Three questions were referred to the Calcutta High Court for determination. The first question referred to the Calcutta High Court was whether, on the facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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