Law:

Section:

Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deduction to be only on actual payment - Assessment year 1989-90 - Where as per State Sales Tax Act assessee was liable to pay interest on sales tax due, such interest could not be disallowed [In favour of assessee] The assessee had purchased forest produce, i.e., wood from the Forest Department of Himachal Pradesh Government. As per the agreement, the assessee was liable to pay besides the agreed price of the product, sales tax, if any, payable by the Forest Department in respect of sale of product to the assessee. The Forest Department initially charged sales tax at lower rates from the assessee but in the previous year relevant to the assessment year 1984-85, it was asked by the Forest Department to make payment of Rs. 31,82,371. The assessee disputed charging of this additional sales tax but made payment of an amount of Rs. 15 lakhs during the previous years relevant to the assessment years 1984-85 and 1985-86. The assessee also paid interest on additional sales tax for said period. The deduction of interest paid was declined by the Appellate Authorities on the ground that no demand for interest was created by the Forest Department and that the assessee had suo motu worked out such demand. Held that Appellate Tribunal had rejected the claim of the assessee only on the ground that the amount of interest of Rs. 10,04,408 did not fall within the expression 'any sum payable' used in section 43B. However, section 17A(2) of the Himachal Pradesh General Sales Tax Act, 1968, specifically provides that if the amount of tax or penalty due from a dealer is not paid by him within the period specified in the notice of demand or, if no period is specified within thirty days from the service of such notice, the dealer shall, in addition to the amount of tax or penalty, as the case may be, be liable to pay simple interest on such amount at the rate of one percentum per month for the first thirty days and for the period subsequent thereto at the rate of one and a half percentum per month. It is, therefore, clear that when there is a demand of tax and that is not paid within the period specified in the…

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