COMMISSIONER OF INCOME-TAX vs. SURAT ELECTRICITY CO LTD

PDF · subscribers
ITR/236/1993HC GujaratGJHC24021271199313 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 was concluded by the Supreme Court's decision in Allied Motors (P) Limited vs. C.I.T. (224 ITR 677), which approved the High Court's own view in C.I.T. vs. Chandulal Venechand (209 ITR 7). In Chandulal Venechand's case, the High Court had interpreted Section 43-B to mean that the proviso related back to the commencement of Section 43-B (April 1, 1984). Consequently, such liabilities would be allowable as deductions if the assessee proved actual payment before the due date for furnishing the return of income under Section 139(1) for the relevant previous year. Therefore, the High Court affirmed the Tribunal's decision, holding that if payment was made within the due date for filing returns under Section 139(1), Section 43-B could not be invoked. The reference was answered in the affirmative against the Revenue.

What were the facts?

The Commissioner of Income-tax (Revenue) referred a question of law to the High Court of Gujarat concerning the assessment years 1984-85 and 1985-86. The Income Tax Appellate Tribunal (ITAT), Ahmedabad, had deleted an amount of Rs. 34,65,614 for AY 1984-85 and Rs. 55,40,585 for AY 1985-86. This deletion pertained to statutory liabilities like Government Duty and Sales Tax, which were outstanding at the end of the previous year relevant to these assessment years. The Revenue contended that these amounts were expressly disallowed under Section 43-B of the Income Tax Act and that the ITAT disregarded the effect of Explanation 2 and the last proviso to Section 43-B.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the ITAT, Ahmedabad, was correct and justified in deleting an amount of Rs. 34,65,614 for Assessment Year 1984-85 (Rs. 55,40,585 for Assessment Year 1985-86) being the statutory liability of Government Duty, Sales tax, etc. outstanding as at the end of the previous year relevant to AY 1984-85/1985-86 which is expressly disallowed under Section 43-B of the IT Act, disregarding the effect of provisions contained in explanation 2 to sec. 43-B of the Act which is expressly representative in application and in last provisio to sec. 43-B of the Act inserted by Finance Act, 1987 with effect from 1.4.1988, and is prospective in application for and from AY 1988-89 onwards? Assessee's Contention: The judgment does not record specific arguments made by the assessee before the High Court, but implies their agreement with the ITAT's deletion. Revenue's Contention: The Revenue contended that the ITAT was incorrect in deleting the amounts. They argued that these statutory liabilities were expressly disallowed under Section 43-B and that the ITAT failed to consider the effect of Explanation 2 and the proviso to Section 43-B, which they considered applicable and not prospective as held by the ITAT.

Which sections of the Income-tax Act were involved?

Section 43-B,Section 139(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No. 236 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 SURAT ELECTRICITY CO LTD ---------------------------------------------------------- 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, on the facts and in the circumstances of the case and in law, the I.T.A.T., Ahmedabad was correct and justified in deleting an amount of Rs. 34,65,614/= for Assessment Year 1984-85 (Rs. 55,40,585/= for Assessment Year 1985-86) being the statutory liability of Government Duty, Sales tax, etc. outstanding as at the end of the previous year relevant to A.Y 1984-85/1985-86 which is expressly disallowed under Section 43-B of the I.T Act, disregarding the effect of provisions contained in explanation 2 to sec. 43-B of the Act which is expressly representative in application and in last provisio to sec. 43-B of the Act inserted by finance Act, 1987 with effect from 1.4.1988, and is prospective in application for and from A.Y 1988-89 onwards ?" 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.

We, therefore, held that the Tribunal was right in holding that if the payment of tax is made within the due date prescribed for filing returns under Section 139 (1) of the Act, section 43-B cannot be resorted to in view of the decision in Chandulal Venechand's case . The question referred to us is answered accordingly in the affirmative against the Revenue. Reference stands disposed of with no order as to costs. ****

Prakash*

More judgments on Section 43-B

All 55 judgments and leading authorities on Section 43-B →

Recent GST High Court judgments

Search GST case law →