TMI Blog1990 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No. 3 found that the statutory dues payable during the accounting year on account of Bihar sales tax, additional sales tax, Central sales tax, provident fund and family pension amounting to Rs. 21,15,885 had not been paid by the petitioner ; this amount was added to the net income of the petitioner under section 43B of the Act. The order of assessment is contained in annexure-1 to the writ petition. Dr. Pal, learned counsel appearing on behalf of the petitioner, firstly contended that section 43B of the Act is ultra vires the Constitution. Having regard to the decisions in Mysore Kirloskar Ltd. v. Union of India [1986] 160 ITR 50 (Kar) and Srikakollu Subba Rao and Co. v. Union of India [1988] 173 ITR 708 (AP), he, however, did not press the same, but submitted that section 43B of the Act being a declaratory statute must be held to have retrospective operation as, otherwise, the same would be rendered ultra vires article 14 of the Constitution. Learned counsel submitted that it was never the intention of Parliament, by introducing section 43B in the Act, not to give deduction of the amount also payable by an assessee by way of tax or by way of contribution to the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed (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. Explanation. -For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this, section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the I St day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. " If the section is literally interpreted, the submission of Dr. Pal must fail, because it has been made clear therein that an assessee shall be entitled to claim deduction of such amount of sales tax, provident fund, etc., in that year only if such sum has been actually pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of provident fund, etc., where the assessee does not discharge his statutory liability, or where the assessee disputes his liability under the provisions of the Sales Tax Act. In other words, an assessee who claims deduction on account of sales tax, provident fund, etc., without depositing the same and thus deprives the Government of its dues while enjoying the benefits of non-payment was not entitled to claim deduction of such an amount. There was no dispute at the Bar that section 43B was introduced not to give any benefit of deduction to unscrupulous assessees. But how do we interpret the words "actually paid by him" appearing in the section ? If it is to be interpreted, as submitted by Mr. Debi Prasad, that "actually paid" in this case will mean payment by the petitioner by December 31, 1983, we will require the petitioner to do an impossibility. Sales tax collected by the petitioner on December 31, 1983, could, under no circumstances, be deposited by it on that date, and the earliest that the petitioner could have deposited that amount was on January 1, 1984, which, admittedly, was not during the currency of the accounting year. Mr. Pal submitted that the words "ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Under the existing provisions of section 43B of the Income-tax Act, it is also provided that any sum payable by the assessee as an employer by way of contribution to the provident fund or superannuation fund, etc., is not allowable as a deduction unless the same is paid 'during the previous year on or before the due date'. The payment in respect of the last month of a previous year shall have to be made by the due date and cannot possibly be made in the previous year itself. It is, therefore, proposed that the words 'during the previous year' occurring in the second proviso to section 43B be deleted." So far as the insertion of the first proviso in section 43B in the Memorandum explaining the provisions in the Finance Bill, 1989, is concerned, the following was stated : "Under the existing provisions of section 43B of the Income-tax Act, a deduction of any sum payable by way of tax, duty, cess or fee, etc., is allowed on actual payment basis only. The objective behind these provisions is to provide for a tax disincentive by denying deduction in respect of a statutory liability which is not paid in time. The Finance Act, 1987, inserted a proviso to section 43B to provide tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The interpretation given by these courts, revolves round the use of the words 'any sum payable'. The interpretation given to these words is that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. This is against the legislative intent and it is, therefore, proposed by way of a clarificatory amendment and for removal of doubts, that the words 'any sum payable' be defined to mean any sum, liability for which has been incurred by the taxpayer during the previous year irrespective of the date by which such sum is statutorily payable." (emphasis added). Explanation 2 was treated as an interpretation clause. In S. Sundaram Pillai v. V. R. Pattabhiraman, AIR 1985 SC 582, the Supreme Court considered the scope and ambit of the proviso and the Explanation. After noticing a number of cases, including authoritative books on the question, it was held that both a proviso and an Explanation may function as interpretation clauses. We have already noticed above that, in the Memorandum explaining the provisions in the Finance Bill, 1989, Explanation 2 was stated to be an interpretation clause. Surely, under the two provisos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judge at the end decides which way the balance tilts, be it ever so slightly." (sic) It is now well known that such interpretation should be preferred which upholds the constitutionality of the statute ( CWT v. Smt. Hashmatunnisa Begum [1989] 176 ITR 98 (SC)). In Goodyear India Ltd. V. State of Haryana [1991] 188 ITR 402 (SC) ; [1990] 2 SCC 71, the Supreme Court held that a rule of reasonable construction should be followed and literal construction may be avoided if that defeats the manifest object and purport of the Act. From what has been stated hereinbefore, it is absolutely clear that the first proviso to section 43B of the Act inserted by the Finance Act, 1987, was enacted in order to suppress the mischief, and for the purpose of giving relief to an assessee who is not an unscrupulous dealer. The said Act, further, is explanatory in nature and thus had to be enacted for the purpose of supplying an obvious omission in a former statute, and thus the same would relate back to the time when the prior Act was passed ( R v. Dursley Inhabitants [1832] 110 English Reports 168). Reed Dickerson in his 'Interpretation and Application of Statutes', at page 135, observed : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of statutes, the proviso to section 43B of the Act should be construed as retrospective in its operation and Explanation 2 thereto should be held to be subject to the said proviso. Explanation 2 appended to section 43B of the Act does not control the proviso thereto. Such a construction will not only be in consonance with the rule of harmonious construction but shall advance the object and purport of insertion of the said proviso by the Finance Act, 1987. In Mysore Kirloskar Ltd. [1986] 160 ITR 50 (Kar), it was held that section 43B was not violative of article 14 of the Constitution, and it does not unreasonably interfere with the freedom of trade and business guaranteed under article 19(1)(g) of the Constitution. We are not concerned with these articles in this case. Mysore Kirloskar Ltd.'s case [1986] 160 ITR 50 (Kar), has, therefore, no application to this case. In Srikakollu Subba Rao and Co. [1988] 173 ITR 708 (AP), the original section 43B inserted by the Finance Act, 1983, was interpreted. It was held in that case that not only should the liability to pay the tax or duty be incurred in the accounting year, but the amount also should be statutorily payable in the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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