COMMISSIONER OF INCOME-TAX vs. PATEL BROTHERS

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ITR/139/1991HC GujaratGJHC24013372199113 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 Court also referred to its own earlier decision in C.I.T. vs. Chandulal Venechand, which was approved by the Supreme Court. In Chandulal Venechand's case, the High Court had interpreted Section 43-B to mean that its proviso related back to the date of operation of Section 43-B, 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 favour of the assessee and against the Revenue. The reference was disposed of accordingly.

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, referred a question to the High Court of Gujarat concerning the deductibility of sales tax paid after the close of the previous year but before the due date for filing the return under Section 139(1). The assessment year in question is 1984-85. The Revenue challenged the ITAT's decision to allow this deduction, particularly in light of the proviso to Section 43-B, which became effective from April 1, 1988. The procedural history involves a reference made by the ITAT to the High Court under Section 256(1) of the Income Tax Act.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sales tax paid after the close of the previous year but before the due date for filing return under Section 139(1) was allowable as a deduction in A.Y 1984-85, when proviso to Section 43-B was made effective from the 1st April, 1988? (Question of law) Assessee's Contention: The judgment does not explicitly record the assessee's arguments. However, the outcome implies the assessee argued for the deductibility of the sales tax paid within the stipulated period. Revenue's Contention: The Revenue contended that the sales tax paid after the close of the previous year should not be allowed as a deduction for AY 1984-85, especially considering the effective date of the proviso to Section 43-B.

Which sections of the Income-tax Act were involved?

Section 256(1),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. 139 of 1991

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 PATEL BROTHERS ---------------------------------------------------------- Appearance: MR MIHIR JOSHI with MR MANISH R BHATT for Petitioner NOTICE NOT RECD BACK 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 holding that the sales tax paid after the close of the previous year but before the due date for filing return under Section 139 (1) was allowable as a deduction in A.Y 1984-85, when proviso to Section 43-B was made effective from the 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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