COMMISSIONER OF INCOME TAX vs. KOTHARI OIL PRODUCTS CO.

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ITR/127/1995HC GujaratGJHC24022452199503 February 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 right in law and on facts. The Court followed the ratio of the Supreme Court decision in Allied Motors (P) Ltd. v. C.I.T. and its own decision in C.I.T. v. M/s. Chandulal Venichand & others. The principle established is that if the unpaid sales tax liability pertaining to the last quarter of a financial year is paid within the time stipulated for filing the return under Section 139(1), the provisions of Section 43B of the Income-tax Act, 1961, cannot be made applicable. This means the deduction for such sales tax liability would be allowed in the year of payment, not disallowed in the year it became due. The question referred to the Court was answered in the affirmative, in favour of the assessee and against the Revenue. No specific operative directions were given beyond answering the reference.

What were the facts?

The Income-tax Appellate Tribunal (ITAT), Ahmedabad, referred a question of law to the High Court of Gujarat concerning the applicability of Section 43B of the Income-tax Act, 1961. The specific issue was whether unpaid sales tax liability for the last quarter of a financial year, if paid within the time stipulated for filing the return under Section 139(1), would attract the provisions of Section 43B. The High Court noted that identical facts and questions had been considered in a related reference, Income-tax Reference No. 295/94, decided concurrently.

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? (Question of law and fact, concerning Section 43B and Section 139(1) of the Income-tax Act, 1961). Assessee's Contention: The assessee implicitly argued, through the ITAT's finding, that payment of the last quarter's sales tax liability within the extended due date for filing the return under Section 139(1) should exempt it from the disallowance under Section 43B. The ITAT's decision was based on the ratio of Supreme Court and High Court judgments. Revenue's Contention: The Revenue contended that Section 43B should be applied, disallowing the deduction for the unpaid sales tax liability, irrespective of when it was paid, if it was not paid within the respective financial year.

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 127 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 KOTHARI OIL PRODUCTS CO. -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner SERVED BY RPAD for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 03/02/98

ORAL JUDGEMENT Per: R.K. Abichandani, J.

1.

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, 1961. "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 ?"

2.

Identical question in similar factual background came up for consideration before us in Income-tax Reference No. 295/94 which is decided by us today. Since the facts are similar and point involved is identical, we do not reproduce the facts in this order from the record of this Reference. In answering the identical question in the said matter we have followed the ratio of the decision of the Supreme Court in Allied Motors (P) Ltd. v. C.I.T. reported in 224 ITR P. 677 and the decision of this Court in the case of C.I.T. v. M/s. Chandulal Venichand & others, reported in 209 ITR P.

7.

For the reasons which are given by us in deciding the question involved in Income-tax Reference No. 295/94, we are of the view that the Tribunal was right 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 question referred to us is, therefore, answered in the affirmative against the Revenue and in favour of the assessee. The Reference stands disposed off accordingly with no order as to costs.

[R.K. ABICHANDANI, J.]

[KUNDAN SINGH, J.] ***** Amp/-

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