Law: Income Tax Act, 1961

Section: 43

Income-tax---Business expenditure---Law applicable to assessment---Deduction only on actual payment---Amendment of S.43-B by Finance Act, 1989---Effect--- Deduction of "sums payable" ---Section 43-B as amended is applicable from assessment year 1984-85---Indian Income Tax Act, 1961, S.43-B. The amendments introduced to the provisions of section 43-B of the Income Tax Act, 1961, by the Direct Tax Laws (Amendment) Act, 1987, the Finance Act, 1988, and the Finance Act, 1989, changed the situation with regard to the contents of the provisions of section 43-B of the Act. By the Finance Act, 1989, the second proviso to section 43-B came to be substituted and it took effect from April 1, 1989. Explanation 2 also came to be amended by the said amendment--the finance Act, 1989 (introducing a deeming provision that the said Explanation 2 will have to be deemed to have been inserted with effect from April 1, 1984). Explanation 2 to section 43-B which is statutorily and legally on the statute book on and from April 1, 1984, makes it clear that even if the concerned amount might not have been payable within the year in question under the relevant taxation law, it would have to be understood as any sum payable in the context. The obvious result would be that the provisions of section 43-B would become operative where the liability to pay the tax or the duty was incurred in the accounting year in question, for which the payment was collected and the amount was actually paid by the assessee even in a situation that such amount might not have been payable on or before the last date of the accounting year or the accounting period. CIT v. Gonvindaraja Reddiar (1991) 187 ITR 417 (Ker.) fol. JUDGMENT V. V. KAMAT, J.---The assessment year in both these references is 1984-85: Although the amounts involved are different, the answer which the Revenue expects by these references is in identical terms is reproduced hereinafter:-- "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that section 43-B of the Income Tax Act, 1961, is not applicable to the assessees case and the amount of Rs.51,298 could not be brought to tax in the assessment…

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