TMI Blog2006 (2) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... tually paid to the coffers of the Revenue, i.e., really paid, and not constructively. Importing any other meaning, as is sought to be canvassed by the learned advocate for the appellant, would amount to doing violence to the plain meaning of the statute. When the words of the statute are clear and unambiguous there is no need to adopt any other meaning or provision of the Act. A bank guarantee is in the nature of a security or a guarantee, which imposes an obligation on the bank to make payment in terms of the bank guarantee, upon the happening of a contingency on the occurrence of which the guarantee becomes enforceable. In the facts of the present case, by furnishing the bank guarantees pursuant to the order of the Supreme Court, the appellants had merely created a right in favour of the Excise Department to enforce the payment of excise duty in the event of their succeeding in the pending litigation. The same is not equivalent to actual payment of tax or duty by way of which funds would be available for meeting the Government expenditure, etc. The apex court in the case of Oswal Agro Mills Ltd. v. Asst. Collector of Central Excise [ 1994 (2) TMI 57 - SUPREME COURT] was called up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, which was taken by the assessee by depositing certain amount in bank fixed deposit as margin, did not tantamount to actual payment and so section 43B is applicable? 4. The assessee-firm is a processing house carrying on the business of dyeing and printing of cloth, entirely on job work basis. The grey cloth is supplied by the merchants, i.e., the owners of the cloth and after dyeing and printing, the same is returned to the respective merchants for which labour charges are recovered. The assessee also collected excise duty from the merchants on the cloth processed for them by way of separate debit note and the same was credited to the excise account of the merchants in a separate ledger account maintained for the purpose, and as and when the payment is made to the excise department this account is debited by such amount. There is no dispute that the aforesaid excise duty received, though kept in a separate account, is a trading receipt as held by this court in the case of Plastic Products Engineering Co. v. CIT [2000] 245 ITR 349. The excise duty is being charged by the Central Excise Department on the selling price of the cloth printed by the assessee for the merchants. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 143(1) of the Act for the assessment year 1987-88 on a total income of Rs. 2,58,195/- respectively. 10. Vide order dated March 14, 1989, made under section 263 of the Act, both the assessments were set aside by the Commissioner of Income-tax, Surat, with a direction to carry out fresh assessments after taking into consideration the applicability of section 43B of the Act with regard to the outstanding liabilities of excise duty appearing in the balance-sheet of the assessee under the head Sundry creditors . 11. The Assessing Officer, accordingly framed the fresh assessments making additions of Rs. 58,75,999/- and Rs. 44,98,378/- for the assessment years 1986-87 and 1987-88 respectively, by invoking the provisions of section 43B of the Act. The Assessing Officer considered the excise duty collection as part of trading receipt, but did not allow any deduction for excise duty on the ground that it was not paid to the Government account in terms of section 43B of the Act. According to the Assessing Officer, deduction was permitted only on the basis of actual payment. 12. The assessee succeeded in appeals before the Commissioner of Income-tax (Appeals) who held that excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court, it was not possible for the assessee to make payment of the amount towards excise duty and that by providing bank guarantee, there was substantial compliance with the provisions of section 43B of the Act. That, actually paid does not have to be construed literally. That the same means readily available and that by virtue of the bank guarantee the funds were readily available with the Department. It was submitted that the interpretation put by the Tribunal resulted in undue hardship to the assessee as the assessee has placed a large amount with the bank towards bank guarantee and was deprived of the use of the same and at the same time was held liable to pay tax on the same. It was submitted that reliance placed by the Tribunal on various decisions of the Supreme Court while interpreting the term actually paid was misplaced, as the said decisions were rendered in a different context and could not be made applicable to the facts of the present case. In conclusion, it was submitted that the Tribunal has erred in holding that the Assessing Officer was justified in invoking the provisions of section 43B of the Act and in making addition in respect of the excise duty collected b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and that therefore, giving the bank guarantee on the basis of the fixed deposits made with the bank cannot be regarded as actual payment of excise duty in the relevant years under consideration because the assessee continues to own the said fixed deposits. That, the Excise Department is entitled to encash the bank guarantee only in the event of their succeeding in the pending litigation before the Supreme Court. That, unless such contingency, viz. success of the Revenue in the pending litigation takes place, the assessee continues to be the owner of the fixed deposits and the interest income earned thereon. In fact, the interest so earned has been returned by the appellants as taxable income in the respective years. The Tribunal was of the view that the actual payment of duty will take place only when the amount of such duty reaches the coffers of the Government and is available for public purposes. 19. The Tribunal referred to the decision of the apex court in the case of Allied Motors P. Ltd. v. CIT [1997] 224 ITR 677 as well as the decision of this court in the case of Lakhanpal National Ltd. v. ITO [1986] 162 ITR 240 in relation to the proposition that under section 43B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be only on actual payment, has, originally been inserted by the Finance Act, 1983. Section 43B as is relevant for the purpose of the present appeals, as it stood at the relevant time, reads as under: 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of (a) any sum payable by the assessee by way of tax or duty under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 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. 22. The scope of effect of the relevant part of the originally inserted section 43B has been elaborated in the following portion of the Departmental Circular No. 372 dated December 8, 1983 as follows: 35.1 Under section 145 of the Income-tax Act, profits and gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method of accounting regularly employed by him. 24. The expression employed in the section is actually paid . In view of the non obstante clause contained in the section, it is not permissible to refer to the expression paid as defined under section 43(2) of the Act or under any other provision of the Act. Hence, the plain meaning of the words actually paid is required to be taken into consideration. The word actual has been defined as something real in opposition to constructive or speculative, Actually means really, truly in fact. Therefore, the plain meaning of the expression actually paid means that the sum should have been actually paid to the coffers of the Revenue, i.e., really paid, and not constructively. Importing any other meaning, as is sought to be canvassed by the learned advocate for the appellant, would amount to doing violence to the plain meaning of the statute. When the words of the statute are clear and unambiguous there is no need to adopt any other meaning or provision of the Act. 25. A bank guarantee is in the nature of a security or a guarantee, which imposes an obligation on the bank to make payment in terms of the bank guarantee, upon the happening of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll amount of such tax or duty or part thereof. The bank guarantee is required to be given either in favour of the principal administrative officer of the court or in favour of the Revenue authority concerned. In the event that the Revenue fails in the proceedings before the court the question of payment of the tax or duty, the amount of which is covered by the bank guarantee, does not arise and, ordinarily, the court, at the conclusion of its order, directs that the bank guarantee shall stand discharged. Where the Revenue succeeds the amount of the tax or duty becomes payable by the assessee to the Revenue and it is open to the Revenue to invoke the bank guarantee and demand payment thereon. The bank guarantee is security for the Revenue, that in the event the Revenue succeeds its dues will be recoverable, being backed by the guarantee of a bank. In the event, however unlikely, of the bank refusing to honour its guarantee it would be necessary for the Revenue or, where the bank guarantee is in favour of the principal administrative officer of the court, that officer to file a suit against the bank for the amount due upon the bank guarantee. The amount of the disputed tax or duty th ..... 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