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No disallowance u/s 43B if the amount is not claimed as deduction
A reading of Section 43B makes it clear that if tax having become payable is not paid by the assessee then alone Section 43B comes into operation. The amount collected tax if never claimed as deduction by the assessee then Section 43B may not have the implications as the assessee has not claimed any deduction of the amount collected by it. This is what is held in India Carbon Ltd. vs. IAC & Anr. (1993) 200 ITR 759 (Gau).
Where no claim of deduction in respect of taxes and duty is made and no charge is made in profit or loss account, liability payable is not to be disallowed and not to be added back to income of assessee by invoking s. 43B.
It is held in various cases that Section 43B is not attracted at all when the assessee does not claim any deduction of the amount; since the question raised by the Revenue does not bring out the real controversy in issue viz., disallowance of unpaid sales-tax the question referred regarding taxability of sales-tax as part of business income or trading receipt is returned unanswered.
Sec. 43B declares that taxes and duties shall not be allowed as deduction from the income unless they are actually paid. It removes the doubt as to the meaning of the word “paid” according to the method of accounting regularly employed by an assessee, insofar as deduction is claimed in respect of any sum payable by way of tax or duty. The declaration does not, however, place any restriction on the business activities and on the system of accounting. Therefore, s. 43B shall only be attracted when the assessee claims deduction for any sum payable by way of tax or duty under any law for the time being in force, and, as such, where no such deduction is claimed nor charge made to the profit or loss account, there was no question of disallowing the amount taken to the balance-sheet on the liabilities side as well as of “add back”. One can rely on CIT vs. S.B. Foundry (1990) 185 ITR 555 (All) as well. The copy of the judgement is produced hereunder:
COMMISSIONER OF INCOME TAX vs. S.B. FOUNDRY
HIGH COURT OF ALLAHABAD
A.P. Mishra, & R.K. Gulati, JJ.
IT Appln. No. 192 of 1989
9th April, 1990
(1990) 58 CCH 0245 AllHC
(1990) 185 ITR 0555
Legislation Referred to
Sections 256, 256(2)
Case pertains to
Asst. Year 1984-85
Decision in favour of:
Reference Question of fact Sales tax Tribunal’s view that sum of sales tax realised in the last month of the previous year not liable to be included in the total income of the assessee Finding of Tribunal justified No arisal of any question of law
BY THE COURT:
Having heard learned counsel for the Revenue, we are not satisfied that any statable question of law arises in this case. In the assessment year 1984-85 which is in dispute, the ITO added a sum of Rs. 10,003 with the following remarks :
“Balance-sheet tallies at Rs. 10,42,319. Liabilities of Rs. 8,312 and Rs. 1,961 are shown as U. P.sales tax and Central sales tax, the same shall be added under s. 43B.”
- The assessee appealed to the AAC who deleted the addition. The order passed by the appellate authority was confirmed by the Tribunal. As the reference under s. 256 was refused, the present application has been filed.
- The appellate authority has found that the amount in dispute represented the sales tax realisation of the last month of the previous year relevant to the assessment year in dispute. Under the provisions of the sales tax law, the amount was payable in the next month and the same was actually paid in the month of November, 1983. The addition is on the finding that the assessee had not claimed the disputed amount as deduction nor has it charged that amount to the profit and loss account. On this factual position, the Tribunal held that there was no question of disallowing the amount taken to the balance-sheet on the liabilities side and, in these circumstances, the question of any “add back” from the profit and loss account did not arise. The Tribunal, therefore, refused to interfere with the order of the AAC. No error in the approach taken by the Tribunal was pointed out to us. Accordingly, the application under s. 256(2) is rejected.