COMMISSIONER OF INCOME TAX vs. EQUATOR ELECTRODES AND ENGG CO P LTD

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ITR/337/1993HC GujaratGJHC24021343199313 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. The Supreme Court had approved the High Court's view in C.I.T vs. Chandulal Venechand. In Chandulal Venechand's case, the High Court had interpreted Section 43B to mean that its proviso related back to the date Section 43B came into operation (April 1, 1984). Consequently, such a liability would be allowable as a deduction if the assessee proved it was discharged by actual payment before the due date for furnishing the return 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 Income Tax Appellate Tribunal (ITAT), Ahmedabad, referred a question of law to the High Court of Gujarat concerning the allowance of sales tax as a deduction. The assessee is Equator Electrodes and Engg. Co. Pvt. Ltd., and the revenue is the Commissioner of Income Tax. The assessment years in question are 1986-87 and 1987-88. The dispute revolves around whether sales tax paid after the close of the previous year but before the due date for filing the return under Section 139(1) was allowable as a deduction, especially considering the insertion of the proviso to Section 43B with effect from April 1, 1988. The High Court was asked to decide this based on the ITAT's order.

What were the issues?

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 u/s. 139(1) was allowable as a deduction in A.Y. 1986-87/1987-88 when the proviso to Section 43B was inserted with effect from 1st April, 1988? The assessee contended that the sales tax paid after the previous year's close but before the return filing due date should be allowed as a deduction. The revenue's contention is not explicitly recorded in the provided text, but the reference itself implies a disagreement with the ITAT's decision favoring the assessee. The core of the dispute lies in the interpretation and applicability of Section 43B and its proviso concerning the timing of deduction for statutory liabilities.

Which sections of the Income-tax Act were involved?

Section 43B,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. 337 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 EQUATOR ELECTRODES AND ENGG CO P 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, 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 u/s. 139 (1) was allowable as a deduction in A.Y 1986-897/1987-88 when provisio 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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Prakash*

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