COMMISSIONER OF INCOME TAX vs. KAMAL METAL INDUTRIES

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ITR/48/1995HC GujaratGJHC24022373199519 March 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
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What did the High Court hold?

The High Court held that the appellate Tribunal was correct in its decision. The Court relied on its own prior decision in CIT vs. M/s. Chandulal Venichand and others (209 ITR 7), which was subsequently approved by the Supreme Court in Allied Motors (P) Ltd. vs. CIT (224 ITR 677). Following these precedents, the Court concluded that if an unpaid sales tax liability for the last quarter is paid before the due date for filing the return under Section 139(1) of the Income-tax Act, 1961, no addition can be made by invoking the provisions of Section 43B of the Act. The ratio decidendi is that payment of such statutory liability before the due date of filing the return satisfies the condition for deductibility, overriding the disallowance provision of Section 43B. The reference was answered in the affirmative, in favour of the assessee and against the Revenue. No order as to costs was made.

What were the facts?

This case involves an Income Tax Reference No. 48 of 1995 before the High Court of Gujarat at Ahmedabad. The Commissioner of Income Tax (Revenue) is the petitioner, and Kamal Metal Industries is the respondent assessee. The reference was made by the Income-tax Appellate Tribunal (ITAT) under Section 256(1) of the Income-tax Act, 1961. The core issue revolves around the deductibility of unpaid sales tax liability pertaining to the last quarter of a financial year, if paid within the time stipulated for filing the return under Section 139(1) of the Act. The ITAT had ruled in favour of the assessee.

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 the return under section 139(1), the same was an allowable deduction and the provisions of section 43B will not be applicable in such cases? (Question of law and fact, concerning Section 43B and Section 139(1) of the Income-tax Act, 1961). Assessee's Contention: The assessee argued, and the Tribunal held, that if the unpaid sales tax liability for the last quarter is paid before the due date for filing the return under Section 139(1), it should be considered an allowable deduction, and Section 43B would not apply. Revenue's Contention: The Revenue, by filing this reference, is challenging the Tribunal's decision, implying they believe Section 43B should apply irrespective of the payment date relative to the return filing date.

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 48 of 1995

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 KAMAL METAL INDUTRIES -------------------------------------------------------------- Appearance: MR B B Naik for MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for the Respondent

--------------------------------------------------------------

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 19/03/98

ORAL JUDGEMENT (Per R.K.Abichandani,J)

The Income-tax Appellate Tribunal has referred the following question for the opinion of this Court under section 256(1) of the Income-tax Act, 1961. "

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 if paid within the time stipulated for filing the return under section 139(1), the same was an allowable deduction and the provisions of section 43B will not be applicable in such cases?"

2.

The above question is squarely covered by the decision of this Court in CIT vs. M/s. Chandulal Venichand and others reported in 209 ITR,7 which view was approved by the Supreme Court in Allied Motors (P) Ltd. vs.CIT, reported in 224 ITR, 677. 3. Following the decision of the Supreme Court in Allied Motors (P) Ltd. (Supra), and the ratio of this Court in M/s. Chandulal Venichand (supra), we are of the view that the Tribunal was right in holding that if unpaid sales tax liability is paid before the due date for filing of the return under section 139(1) of the Income tax Act, no addition could be made invoking the provisions of section 43B of the Act. The question referred to us is therefore, answered in the affirmative against the Revenue and in favour of the assessee. The Reference stands disposed of accordingly with no order as to costs.

... ***darji

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