TMI Blog2008 (2) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... tha S. Nair for the respondent. JUDGMENT The judgment of the court was delivered by C. N. Ramachandran Nair, J. - This is an appeal filed by the Revenue under Section 260A of the Income Tax Act challenging the order of the Income Tax Appellate Tribunal confirming cancellation of proceedings under Section 143(1)(a) by the C.I.T.(Appeals) pertaining to disallowance of sales tax payments made by the assessee. In the accounting year relevant for the assessment year 1994-95, the assessee which was following the mercantile system of accounting, made additional payment of Rs.23 lakhs towards sales tax payable for April 1994. Since it was specifically stated in the statement of accounts accompanying the return that the amount paid was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be allowed, no matter the assessee has paid it or not. In order to appreciate the contentions, we have to refer to Section 43B, the relevant clauses of which are extracted hereunder: "Section 43B.Certain deductions to be only on actual payments: - 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, duty, cess or fee, by whatever name called, 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, or (c)any sum referred to in cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date". 3. It is not in dispute that sales tax liability of the assessee is an allowable deduction in the computation of income from business by virtue of Section 29 read with Section 37(1) of the Income Tax Act. Among other things it is stated in Section 145 of the Income Tax Act that income chargeable under the head "profits and gains of business or profession" should be comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow the deductions referred to in clauses (a) to (f) only on payment basis, even though assessee is following mercantile system of accounting. In other words, it is an exception to Section 145 of the Act in as much as even if the claim is an allowable deduction of the assessee, based on system of accounting followed by the assessee, it will still be inadmissible under Section 43B if it is not paid on or before the end of the relevant previous year or at least before date of filing of the return. Therefore, Section 43B is only supplementary to Section 145 and it is only an additional condition for allowance of deductions otherwise allowable under the other provisions of the Act. The scheme of payment of sales tax under the Sales Tax Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility by the assessee in the previous year, though the amount is not payable during the previous year under the relevant law. So far as sales tax is concerned, it is a tax on sale or purchase of commodity. Since the liability falls under the statute and since the assessee has no case that the remittance was towards tax due for the previous year or payable in that year, the assessee is not entitled to claim deduction under Section 29 read with Section 37(1) and Section 145 of the Income Tax Act. As already held, Section 43B in itself does not help the assessee to claim deduction as it is only an additional condition for allowing deduction which is otherwise admissible under the provisions of the Act. 4. The next question to be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability. Therefore, we find that the Assessing Officer needed no clarification for making disallowance because assessee itself conceded that it is a liability of the next financial year. We are therefore of the view that the item disallowed is one prima facie inadmissible and hence the Assessing Officer was perfectly justified in disallowing the claim in the proceedings completed under Section 143(1)(a) of the Act. In fact, under the scheme of Sales Tax Act in the computation of liability for the previous year, the amount paid will be just refunded to the assessee as excess tax paid for adjustment towards liability for next year. Therefore, even if the assessee's claim was allowed by mistake by the Officer, the amount is assessable in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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