COMMISSIONER OF INCOME TAX vs. PURSHOTTAM AND CO

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ITR/269/1993HC GujaratGJHC24021296199313 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 Appellate Tribunal was right in law and on facts. The Court's decision was based on the settled legal position established by the Supreme Court in Allied Motors (P) Limited vs. C.I.T. The Supreme Court had 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 Section 43B to mean that its proviso related back to the section's commencement date (April 1, 1984). Consequently, a sales tax liability would be allowable as a deduction if the assessee proved it was actually paid 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 question referred to the Court was answered in the affirmative, favoring the assessee and against the Revenue. No specific operative directions were given as the matter was disposed of based on the legal precedent.

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, referred a question of law to the High Court of Gujarat concerning the deductibility of unpaid sales tax liability and sales tax surcharge. The assessee, Purshottam and Co., incurred such liabilities. The dispute revolved around whether these liabilities, if paid before the due date for filing the return under Section 139(1) of the Income Tax Act, could be disallowed as a deduction by invoking Section 43B. The assessment years are not specified. The procedural history involves a reference made by the Commissioner of Income Tax to the High Court under Section 256(1) of the Income Tax Act.

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 and sales tax surcharge is paid before the due date of filing of the return under section 139 (1) of the Income Tax Act, addition cannot be made invoking the provisions of Section 43B? Assessee's Contention: The assessee's position, as reflected in the Tribunal's holding, is that if the sales tax liability and surcharge are paid before the due date of filing the return under Section 139(1), no addition can be made under Section 43B. This implies an argument that the proviso to Section 43B allows for such deductions. Revenue's Contention: The Revenue's stance, implied by the reference and the challenge to the Tribunal's order, is that the addition made under Section 43B is justified, meaning they likely argued that the payment before the due date of the return does not qualify for deduction under Section 43B.

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. 269 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 PURSHOTTAM AND CO ---------------------------------------------------------- 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 to Tribunal is right inlaw and on facts in holding that if the unpaid sales tax liability and sales tax surcharge is paid before the due date of filing of the return under section 139 (1) of the Income Tax Act, addition cannot be made invoking the provisions of Section 43B ? " 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. ****

Prakash*

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