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Section 43B, read with section 37(1), of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment - Assessment year 1989-90 - Whether an assessee is entitled to claim deduction on account of excise duty paid in advance as business expenditure - Held, yes - Whether, therefore, revenue's objection that it was only on removal of goods that amount credited to personal ledger account could be claimed as deductible under section 43B, could not be accepted - Held, yes [In favour of assessee] FACTS In instant appeal, the question came up for consideration was as to whether the assessee was entitled to claim deduction on account of excise duty paid in advance as business expenditure. HELD It is a common case of the parties that the objective with which the provision of section 43B was introduced was to plug a loophole in the statute which permitted deduction on an accrual basis without the requisite obligation to deposit the tax with the State. Resultantly, on the basis of mere book entries the assessee would claim deduction without actually paying the tax to the State. [Para 5] In the factual matrix of the present case, the controversy arises in respect of the excise duty payable by the assessee on the goods manufactured in the factory. The incidence for imposition of excise duty, that is, the liability arises on manufacture of goods. A self-assessment procedure was provided under rule 173G of the Central Excise Rules. [Para 6] It is the submission of department that the aforesaid rule envisages payment in advance of the excise duty which is to be adjusted only on the goods being removed from the factory premises. It is, thus, contended that the amount of duty is liable for deduction only when the goods are removed from the factory premises. [Para 7] The mischief which is sought to be cured by induction of the provisions of section 43B is subserved by the payment of the duty to the department concerned. The procedure envisaged for payment of excise duty envisages such duty to be deposited in advance with the treasury before the goods are removed from the factory premises. The duty, thus, already stands deposited in the…

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