COMMISSIONER OF INCOME-TAX vs. VARIETY ENGINEERS PVT. LTD.

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ITR/192/1993HC GujaratGJHC24021246199313 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 decision of the Hon'ble Supreme Court in Allied Motors (P) Limited vs. C.I.T., reported in 224 ITR 677. This Supreme Court decision had approved the view of the Gujarat High Court in C.I.T vs. Chandulal Venechand, reported in 209 ITR 7. In Chandulal Venechand's case, the High Court had interpreted Section 43B to mean that the proviso related back to the date of operation of Section 43B, i.e., April 1, 1984. Consequently, a liability incurred in a previous year 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 that relevant previous year. Therefore, the High Court answered the referred question in the affirmative, in favor of the assessee and against the Revenue. The reference was disposed of accordingly.

What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income-Tax against Variety Engineers Pvt. Ltd. The reference concerns Assessment Year 1985-86 and the allowability of sales-tax paid after the close of the previous year but before the due date of filing the return. The core of the dispute is the interpretation of Section 43B of the Income Tax Act, particularly in light of its proviso which was inserted with effect from April 1, 1988. The Income Tax Appellate Tribunal had ruled in favor of the assessee, holding the sales-tax payment as an allowable deduction. The High Court is being asked to decide on the correctness of the Tribunal's decision.

What were the issues?

The Tribunal had to decide the following question of law: 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sales-tax paid after the close of the previous year but before the due date of filing of return under Section 139(1) was allowable as a deduction in A.Y 1985-86 when proviso to section 43B was inserted with effect from 1st April, 1988? The Revenue contended that the sales-tax paid after the close of the previous year was not allowable as a deduction for AY 1985-86, especially considering the insertion of the proviso to Section 43B from April 1, 1988. The Assessee argued that the sales-tax payment was an allowable deduction. The judgment does not explicitly detail the arguments made by each side beyond the framing of the question and the subsequent reliance on Supreme Court and High Court decisions.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No. 192 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? 1 to 5 : NO ---------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus VARIETY ENGINEERS PVT. LTD. ---------------------------------------------------------- Appearance: MR MIHIR JOSHI with MR MR BHATT for Petitioner MR BD KARIA with R.K PATEL for the Assessee ----------------------------------------------------------

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, the Appellate Tribunal was right in law in holding that the sales-tax paid after the close of the previous year but before the due date of filling of return under Section 139 (1) was allowable as a deduction in A.Y 1985-86 when proviso to section 43B was inserted with effect from 1st April, 1988 ?" 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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