RAJESWAR KUMAR AND BROS. v. INCOME TAX OFFICER
[Citation -1987-LL-0924]

Citation 1987-LL-0924
Appellant Name RAJESWAR KUMAR AND BROS.
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 24/09/1987
Assessment Year 1984-85
Judgment View Judgment
Keyword Tags prejudicial to the interests of revenue • sales tax
Bot Summary: The assessee charged sales tax on the sales made by it in the last quarter of the previous year but did not pay the same to the ST authorities as it was permissible under the Sales Tax law to pay the sales tax collected in the entire quarter within 30 days reckoned from the end of the quarter. Subsequently, the CIT scrutinised the record and came to hold the view that the assessee was not entitled to the aforesaid deduction of sales tax which was paid on a date falling outside the previous year and so it should not have been allowed as a deduction under s. 43B. Hence, he held that t h e assessment as made by the ITO was erroneous and prejudicial to the interests of revenue and started proceedings under s. 263. After overruling the objection of the assessee in course of hearing before him, he passed the impugned order directing the ITO to disallow the aforesaid claim of the assessee. The question arises as to what happens when as in the instant case, the law allows the time of 30 days in which the assessee can pay the tax. In the latter case, in our opinion, the assessee would be entitled to argue that the amount became payable by him only on the last day of the said 30 days because option is given by law to him to choose on which of the 30 days he would decide to pay. The date on which the tax can be said to have become payable was not highlighted in that case. We come to the conclusion that s. 43B is not meant to be applied to cases like the one before us where the assessee has paid the sales tax within the time permitted by law.


This appeal has been filed by assessee against order dt. 13th Aug., 1986, of CIT passed under s. 263 of IT Act, 1961 for asst. yr. 1984- 85. assessee is partnership firm. For asst. yr. 1984-85 with which we are now concerned, previous year of assessee ended on 4th Nov., 1983. assessee charged sales tax on sales made by it in last quarter of previous year but did not pay same to ST authorities as it was permissible under Sales Tax law to pay sales tax collected in entire quarter within 30 days reckoned from end of quarter. In other words, law permitted assessee to pay said sales tax within certain days counted from end of previous year. assessee paid amount within that time allowed by law. It so happened that date of payment fall outside previous year though within date permissible under law. ITO allowed claim of assessee in as much as he did not make any addition to disclosed income. Subsequently, CIT scrutinised record and came to hold view that assessee was not entitled to aforesaid deduction of sales tax which was paid on date falling outside previous year and so it should not have been allowed as deduction under s. 43B. Hence, he held that t h e assessment as made by ITO was erroneous and prejudicial to interests of revenue and started proceedings under s. 263. After overruling objection of assessee in course of hearing before him, he passed impugned order directing ITO to disallow aforesaid claim of assessee. Shri D. Das, learned representative for assessee, urged before us that CIT erred in his decision. He stated that s. 43B would apply only when tax which has become payable is not paid. He urged that sales tax now under consideration has not yet become payable because sales tax of State of West Bengal allowed same to be paid even after close of previous year which has been done in this case. He relied on decision in case of S. Govindaraja Reddiar vs. ITO (1986) 19 ITD 177 (Coch). On other hand, Shri K.L. Bhowmick, learned representative for Department, supported order of CIT. He urged that s. 43B applies to tax not paid during previous year. In this connection, he relied on decision in case of New Cawnpore Flour Mills (P) Ltd. vs. ITO (1986) 19 ITD 360 (All): (1986) 25 TTJ (All) 89. We have considered contentions of both parties as well as facts on record. Sec. 43B says that any sum payable by assessee by way of tax or duty under any law shall be allowed only in computing income of previous year in which sum is actually paid. point to be noted is that tax or duty should be payable and yet not paid in particular previous year. If so, it would not be allowed as deduction in that year but would be allowed in year in which it is actually paid. question arises as to what happens when as in instant case, law allows time of 30 days in which assessee can pay tax. It may be possible to argue that tax has become payable right from first day of permissible 30 days. Evidently, it is also arguable that assessee had option to defer payment till last day of permitted 30 days. In latter case, in our opinion, assessee would be entitled to argue that amount became payable by him only on last day of said 30 days because option is given by law to him to choose on which of 30 days he would decide to pay. It is only on that date it can be legitimately said that tax has become payable so far as he is concerned. In this view of matter, we agree with view taken in case of S. Govindaraja (supra). similar view has also been taken in case of Kapoor Motor Engineering (P) Ltd. vs. ITO (1987) 21 ITD 4 (Ctk). We find that case of New Cawnpore Flour Mills (supra) is not on all force with instant case because it is not known whether assessee in that case did pay amount within time permitted by law. Also, date on which tax can be said to have become payable was not highlighted in that case. Hence, we come to conclusion that s. 43B is not meant to be applied to cases like one before us where assessee has paid sales tax within time permitted by law. Consequently, there was no mistake in original assessment order and CIT never got valid jurisdiction to proceed under s. 263 of Act. We hereby cancel his order dt. 13th Aug., 1986. In result, appeal is allowed. *** RAJESWAR KUMAR AND BROS. v. INCOME TAX OFFICER
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