TMI Blog2009 (11) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... 88 – Decision in Allied Motors (P) Limited vs. Commissioner of Income Tax, [2008 -TMI - 5575 - SUPREME Court], followed - 7771 OF 2009 - - - Dated:- 25-11-2009 - CIVIL APPEAL NO.7771 OF 2009 (Arising out of S.L.P. (C) No.23851 of 2007) With Civil Appeal No.7770/2009 @ S.L.P. (C) No.17835/2008, Civil Appeal No.7765/2009 @ S.L.P. (C) No.28521/2008, Civil Appeal No.7769/2009 @ S.L.P. (C) No.6844/2008, Civil Appeal No.7767/2009 @ S.L.P. (C) No.9589/2008, Civil Appeal No.7756/2009 @ S.L.P. (C) No.9590/2008, Civil Appeal No.7766/2009 @ S.L.P. (C) No.9591/2008, Civil Appeal No.7763/2009 @ S.L.P. (C) No.14363/2008, Civil Appeal No.7764/2009 @ S.L.P. (C) No.17840/2008, Civil Appeal No.7758/2009 @ S.L.P. (C) No.20012/2009, Civil Appeal No.7762/2009 @ S.L.P. (C) No.1344/2009, Civil Appeal No.7755/2009 @ S.L.P. (C) No.20581/2008, Civil Appeal No.7757/2009 @ S.L.P. (C) No.18380/2009, Civil Appeal No.7760/2009 @ S.L.P. (C) No.3759/2009, Civil Appeal No.7754/2009 @ S.L.P. (C) No.21067/2009, Civil Appeal No.7759/2009 @ S.L.P. (C) No.25174/2009, Civil Appeal No.7768/2009 @ S.L.P. (C) No.30587/2008 and Civil Appeal No.7761/2009 @ S.L.P. (C) No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first proviso by which uniformity was brought about between payment of fees, taxes, cess, etc., on one hand and contribution made to Employees' Provident Fund, etc., on the other. According to the Department, the omission of the second proviso giving relief to the assessee(s) [employer(s)] operated only with effect from 1st April, 2004, whereas, according to the assessee(s)-employer(s), the said Finance Act, 2003, to the extent indicated above, operated with effect from 1st April,1988 [retrospectively]. The lead matter in this batch of civil appeals is Commissioner of Income Tax vs. M/s. Alom Extrusions Limited [civil appeal arising out of S.L.P. (C) No.23851 of 2007]. Prior to the amendment of Section 43-B of the Act, vide Finance Act, 2003, the two provisos to Section 43-B of the Act read as under: "Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) or clause (e) or clause (f), which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction as business expense by making a provision to that effect in his Books of Accounts. The same situation arose prior to 1st April, 1984, in the context of assessees collecting sales tax and other indirect taxes from their respective customers and claiming deduction only by making provision in their Books without actually remitting the amount to the exchequer. To curb this practice, Section 43-B was inserted with effect from 1st April, 1984, by which the Merchantile System of Accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under Section 43-B, it became mandatory for the assessee(s) to account for the afore-stated items not on Merchantile basis but on cash basis. This situation continued between 1st April, 1984, and 1st April, 1988, when the Parliament amended Section 43-B and inserted first proviso to Section 43-B. By this first proviso, it was, inter alia, laid down, in the context of any sum payable by the assessee(s) by way of tax, duty, cess or fee, that if an assessee(s) pays such tax, duty, cess or fee even after the closing of the accounting year but before the date of filing of the Return of income under Section 139(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parliament inserted one more amendment vide Finance Act, 2003, which, as stated above, came into force with effect from 1st April, 2004. In other words, after 1st April, 2004, two changes were made, namely, deletion of the second proviso and further amendment in the first proviso, quoted above. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1st April, 2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1st April, 1988, whereas the argument of the Department was that Finance Act, 2003, was amendatory and it applied prospectively, particularly when the Parliament had expressly made the Finance Act, 2003, applicable only with effect from 1 st April, 2004. It was also argued on behalf of the Department that even between 1st April, 1988, and 1st April, 2004, Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1st April, 2004, would become curative in nature, hence, it would apply retrospectively with effect from 1st April, 1988. Secondly, it may be noted that, in the case of Allied Motors (P) Limited vs. Commissioner of Income Tax, reported in [1997] 224 I.T.R.677, the Scheme of Section 43-B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under Section 43-B of the Act while computing the business income of the previous year? That was a case which related to Assessment Year 1984-1985. The relevant accounting period ended on June 30, 1983. The Income Tax Officer disallowed the deduction claimed by the assessee, which was on account of sales tax collected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43-B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Section 43-B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1st April, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003. Before concluding, we extract hereinbelow the relevant observations of this Court in the case of Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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