COMMISSIONER OF INCOME TAX vs. SENSITIVE INDUSTRIES

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ITR/274/1993HC GujaratGJHC24021301199313 April 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the question referred to it stands concluded by the decision of the Hon'ble Supreme Court in Allied Motors (P) Limited vs. C.I.T. The Supreme Court had approved the view of the Gujarat High Court in C.I.T vs. Chandulal Venechand. In Chandulal Venechand's case, the High Court had interpreted Section 43B and its proviso. It was held that the proviso related back to the date of operation of Section 43B (April 1, 1984). Consequently, such a sales tax liability would be allowable as a deduction if the assessee proved it was actually paid before the due date for furnishing the return of income under Section 139(1) for the relevant previous year in which the liability was incurred. Therefore, the High Court answered the referred question in the affirmative, in favour of the assessee and against the Revenue.

What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income Tax (Revenue) against Sensitive Industries (Assessee). The reference was made to the High Court of Gujarat under Section 256(1) of the Income Tax Act, 1961, following a decision by the Income Tax Appellate Tribunal, Ahmedabad. The core of the dispute revolves around the deductibility of unpaid sales tax liability for the last quarter of a financial year. The Tribunal had ruled that if this liability was paid within the stipulated time for filing the income tax return under Section 139, the provisions of Section 43B could not be invoked to disallow the deduction.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in holding that if the unpaid sales tax liability pertaining to the last quarter is paid within the stipulated time for filing of return under Section 139, the provisions of Section 43B cannot be invoked? (Question of law and fact, concerning Section 43B of the Income Tax Act, 1961). Assessee's Contention: The judgment does not explicitly record the assessee's arguments. However, the Tribunal's decision, which is being challenged, implies the assessee argued that payment of the sales tax liability before the due date of filing the return under Section 139(1) should allow for the deduction, notwithstanding Section 43B. Revenue's Contention: The Revenue, through the Commissioner of Income Tax, is challenging the Tribunal's finding, implying they argued that Section 43B should be invoked to disallow the deduction regardless of the subsequent payment date, as the liability was unpaid during the previous year.

Which sections of the Income-tax Act were involved?

Section 256,Section 43B,Section 139

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No. 274 of 1993

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ======================================================== 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

---------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus SENSITIVE INDUSTRIES ---------------------------------------------------------- Appearance: MR MIHIR JOSHI with MR M R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1 ----------------------------------------------------------

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 13/04/98

ORAL JUDGEMENT [Per : 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.

"Whether, the Appellate Tribunal is right in law and on facts in holding that if the unpaid sales tax liability pertaining that if the unpaid sales tax liability pertaining to the last quarter is paid within the stipulated time for filing of return u/s. 139, the provisions of section 43B cannot be invoked ? " The question referred to this Court now stands concluded by the decision of Hon'ble the Supreme Court in approved by the Supreme Court. In Chandulal Venechand's case, this Court while construing the provisions of Section 43-B had taken a view that the proviso to Section 43-B of the Act related back to the date when Section 43-B came into operation i.e., April 1, 1984. It was held that such liability would therefore be allowable as a deduction provided the assessee established that it was discharged by actual payment before the date applicable in his case for furnishing the return of income under Section 139 (1) of the Act in respect of relevant previous year in which the liability had been incurred.

In view of this settled legal position, the question referred to this Court is answered in the affirmative in favour of the assessee and against the Revenue. The Reference stands disposed of accordingly with no order as to costs.

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Prakash*

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