Law:

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Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment - Assessment year 1989-90 - Assessee-company took over assets and liabilities of a company named 'V' Ltd. - 'V' Ltd. had claimed deduction of Rs. 2,36,85,075 in respect of payment of custom duty which was allowed - Lower authorities held that as said deduction was allowed in hands of 'V' Ltd. and closing stock, after such deduction, had been taken over by assessee-company, opening stock in hands of assessee-company had to be enhanced by said figure and, accordingly made addition - Tribunal, however, deleted said addition by holding that an amount of Rs. 2,36,85,075 allowed as deduction under section 43B to amalgamating sister concern would not be liable to be included in hands of successor amalgamating company with reference to provisions of section 43B - Whether Tribunal was justified in its view - Held, yes CASE REFERRED TO Saraswati Industrial Syndicate Ltd. v. CIT [1990] 186 ITR 278/ 53 Taxman 92 (SC) (para 4). B.B. Naik for the Appellant. J.P. Shah for the Respondent. ORAL JUDGMENT D.A. Mehta, J. - On 23-3-2000, at the time of admission, following question of law was formulated by this Court : "(B) Whether, on the facts and circumstances of the case based on reappraisal of evidence, the Income-tax Appellate Tribunal was justified in holding that an amount of Rs. 2,36,85,075 allowed as deduction under section 43B to the amalgamating sister concern would not be liable to be included in the hands of successor amalgamating company with reference to the provisions of section 43B?" 2. The assessment year in question is 1989-90. The assessee, a limited company took over the assets and liabilities of another company being Vareli Textile Industries Ltd. In relation to the customs duty paid by Vareli Textile Industries Ltd., the said company had claimed deduction of Rs. 2,36,85,075. Vareli Textile Industries Ltd., amalgamated with the assessee-company with effect from 1-4-1988. The Assessing Officer made addition protectively in the hands of the…

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