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TMI BlogNavigating Section 43B: Supreme Court Decision on Unutilised MODVAT Credit and Sales Tax RecoverableX X X X Extracts X X X X X X X X Extracts X X X X ..... utilised MODVAT credit and sales tax could be allowed as deductions. This judgment provides clarity on the treatment of such credits and has far-reaching implications for businesses engaged in manufacturing and similar activities. Arguments Presented By Appellant- The appellant, a company engaged in the manufacturing of automobiles, contended that the unutilised MODVAT credit and the amount in the Sales Tax Recoverable Account for the assessment year 1999-2000 should be allowed as deductions under Section 43B of the Income Tax Act. The appellant argued that the payment of excise duty to suppliers of raw materials should be treated as a payment of excise duty qualifying for deduction under Section 43B. The appellant also cited the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny sum 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 liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. The Court highlighted that for a deduction under Section 43B, the payment must be made "by way of tax, duty, cess or fee" and should be "actually paid" in the relevant previous year. The unutilised MODVAT credit does not fulfill these conditions as it represents an advance payment and not an actual payment of duty by the assessee. The Court further explained that the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity is incurred but not paid within the year and is paid in the subsequent year before the return filing date. In this case, no liability to adjust the unutilised MODVAT credit existed in the previous year . The liability to pay excise duty arose in the subsequent year (from 01.04.1999), and what we are concerned with is unutilised MODVAT Credit as on 31.03.1999 on which date the asseessee was not liable to pay any more Excise Duty.Hence, the appellant could not claim the benefit of the proviso to Section 43B. Concluding Remarks The Supreme Court upheld the decisions of the lower courts, ruling that the unutilised MODVAT credit and the amount in the Sales Tax Recoverable Account do not qualify for deductions under Section 43B of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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