Law: Income Tax Act, 1961

Section: 43,139

Income-tax---Business expenditure---Sales tax---Deduction only on actual payment--¬Unpaid sales tax liability paid before due date for filing return under S.139(1)---Deductible and cannot be disallowed---Indian Income Tax Act, 1961, Ss.43 .13 & 139(1). If unpaid sales tax liability is paid before the due date for filing the return of income under section 139(1) of the Income Tax Act, 1961, no addition could be made invoking the provisions of section 43B of the Act. Allied Motors (P.) Ltd. v. CIT (1997) 224 ITR 677 (SC) and CIT v. Chandulal Venichand, (1994) 209 ITR 7 (Guj.) fol. JUDGMENT R. K. ABICHANDANI, J.---The Income-tax Appellate Tribunal, Ahmedabad, has referred the following question for the opinion of this Court under section.256(1) of the Income Tax Act, 1961: "Whether the Appellate Tribunal is right to law and facts to holding that if the unpaid sales tax liability is paid before the due date for filing of the return under section 139(1), no addition could be made invoking the provisions of section 43B of the Income-tax Act?" The matter relates to the assessment year 1985-86. While making the income-tax assessment of the assessee-company, the Assessing Officer noted that there was unpaid sales tax liability of Rs.30,123 under the Gujarat Sales Tax Act and of Rs.39,052 under the Central Sales Tax Act, aggregating to Rs.69,175 at the end of the accounting period, and, invoking the provisions of section 43B of the said Act, disallowed the said amount. The Commissioner of Income-tax (Appeals) confirmed that order. The Appellate Tribunal, in the appeal by the assessee, following its earlier decision in the case of Chandulal Venichand v. I.T.O. held that no addition could be made for the said sum of Rs.69,175. The case of Chandulal Venichand (1994) 209 ITR 7 (Guj.), was carried to the High Court at the instance of the Revenue and this Court in CIT v. Chandulal Venichand (1994) 209 ITR 7 (Guj.), while construing the provisions of section 43B of the said Act held that the purpose underlying section 43B was to curb the practice of some taxpayers of not discharging their statutory liability such as in respect of excise duty, sales tax, employers…

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