COMMISSIONER OF INCOME-TAX vs. DHARMESH AGENCY

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ITR/401/1992HC GujaratGJHC24015741199213 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). This Supreme Court decision approved the view of the Gujarat High Court 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 operation of Section 43-B from April 1, 1984. Consequently, a liability would be allowable as a deduction if it was discharged by actual payment 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?

The Commissioner of Income-tax (Revenue) has referred a question of law to the High Court of Gujarat at Ahmedabad concerning the applicability of Section 43-B of the Income Tax Act. The Income Tax Appellate Tribunal (Tribunal) had deleted a disallowance of Rs. 3,21,516 made by the Revenue on account of unpaid sales tax. The assessment year(s) and the specific order of the Tribunal are not explicitly stated, but the dispute revolves around the disallowance of a sales tax liability. The procedural history involves a reference made by the Revenue to the High Court under Section 256(1) of the Income Tax Act.

What were the issues?

1. Whether the Tribunal is right in law and on facts in holding that the provisions of Section 43-B were not applicable, thereby deleting the disallowance of Rs. 3,21,516 on account of unpaid sales tax? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the Tribunal's decision, which is being upheld, implies that the assessee argued for the non-applicability of Section 43-B or for the deductibility of the sales tax liability under the proviso to Section 43-B. Revenue's Contention: The Revenue's contention, implicit in the reference, is that Section 43-B was applicable to the unpaid sales tax, and therefore, the disallowance made by the Assessing Officer was justified. The Revenue is challenging the Tribunal's deletion of this disallowance.

Which sections of the Income-tax Act were involved?

Section 43-B,Section 139(1),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No. 401 of 1992

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 DHARMESH AGENCY ---------------------------------------------------------- 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 Tribunal is right in law and on facts in holding that the provisions of Section 43-B were not applicable and thereby deleting the disallowance of Rs. 3,21,516/= on account of unpaid Sales tax ?" 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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