COMMISSIONER OF INCOME TAX vs. FARMSON PHARMACEUTICAL GUJARATP LTD

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ITR/333/1993HC GujaratGJHC24021339199313 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 Supreme Court in Allied Motors (P) Limited vs. C.I.T. The High Court's own earlier decision in C.I.T vs. Chandulal Venechand, which was approved by the Supreme Court, was the basis for this conclusion. 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, a liability 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 the relevant previous year in which the liability was incurred. Therefore, the Tribunal was right in allowing the sales tax as a deduction. The question is answered in the affirmative in favour of the assessee and against the Revenue. No issue was expressly left undecided.

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 assessment year 1985-86. The assessee, Farmson Pharmaceutical Gujarat Ltd., had paid sales tax after the close of the previous year but before the due date for filing its return under Section 139(1). The Income Tax Appellate Tribunal had allowed this sales tax payment as a deduction. The Revenue challenged this decision, particularly in light of the insertion of the proviso to Section 43B of the Income Tax Act, which became effective from April 1, 1988. The procedural history involves a reference made by the Tribunal to the High Court under Section 256(1) of the Act.

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 under Section 139(1) was allowable as a deduction in Asstt. Year 1985-86 when proviso to section 43B was inserted with effect from 1st April, 1988? Assessee's Contention: The judgment does not explicitly record the assessee's arguments. However, the outcome implies the assessee argued for the allowability of the deduction based on the payment being made before the due date of filing the return. Revenue's Contention: The Revenue challenged the allowability of the deduction, likely arguing that the insertion of the proviso to Section 43B, even if effective later, should be considered in relation to the assessment year in question, or that the payment was not deductible in the year the liability arose.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No. 333 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 FARMSON PHARMACEUTICAL GUJARATP 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 under Section 139 (1) was allowable as a deduction in Asstt. Year 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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Prakash*

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