COMMISSIONER OF INCOME-TAX vs. HARSHADBHAI NATWARLAL

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ITR/270/1994HC GujaratGJHC24020346199413 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 stands concluded by the decision of the Hon'ble Supreme Court in Allied Motors (P) Limited vs. C.I.T., which approved the view of the Gujarat High Court in C.I.T vs. Chandulal Venechand. In Chandulal Venechand's case, the High Court had interpreted the proviso to Section 43B to mean that it related back to the date of operation of Section 43B (April 1, 1984). Consequently, such 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. The reference was disposed of accordingly.

What were the facts?

The Commissioner of Income-tax (Revenue) referred a question of law to the High Court of Gujarat at Ahmedabad concerning the applicability of Section 43B of the Income Tax Act. The Income Tax Appellate Tribunal (ITAT), Ahmedabad, had ruled that if unpaid sales tax liability pertaining to the last quarter of a financial year was paid within the time stipulated for filing the return under Section 139(1), then Section 43B would not be applicable. The ITAT's decision was challenged by the Revenue. The assessment year(s) and the specific amount in dispute are not explicitly stated in the provided text. The procedural history involves a reference made by the ITAT to the High Court under Section 256(1).

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in holding that if the unpaid sales tax liability pertaining to the last quarter is paid within the time stipulated for filing of return under Section 139(1), the provisions of Section 43B cannot be made applicable? The Revenue contended that Section 43B mandates that certain expenses, including statutory liabilities like sales tax, are only deductible in the year they are actually paid. The assessee argued, and the ITAT held, that a proviso to Section 43B, as interpreted by the High Court and subsequently the Supreme Court, allows for deduction in the year the liability was incurred if it is paid before the due date of filing the return under Section 139(1). The Revenue's argument implicitly challenges this interpretation of the proviso and its retrospective application. The assessee's position relies on the favorable interpretation of the proviso to Section 43B.

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. 270 of 1994

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 HARSHADBHAI NATWARLAL ---------------------------------------------------------- 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 Appellate Tribunal is right in law and on facts in holding that if the unpaid sales tax liability pertaining to the last quarter is paid within the time stipulated for filing of return under sec. 139 (1) the provisions of section 43B cannot be made applicable ?" 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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