COMMISSIONER OF INCOME TAX vs GEETA TRADING CO.

By the Court

The Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as ''the Tribunal'') has referred to us u/s 256(1) the following question(s) for our opinion :

In DB. IT. Ref. No. 22/94 (Assessment year 1985-86)

"Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in vacating the order passed by the Commissioner u/s 263 of the Income Tax Act, 1961, and restoring the Income Tax Officers order, directing the assessing officer to allow the outstanding sales-tax liability in the year under consideration provided the same is found to have been paid by the assessee as per provisions of the relevant sales-tax law and before the date of filing the return u/s 139(1) of the Income Tax Act ?"

In DB. IT Ref No. 74/95 (Assessment year 1985-86)

(1). "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of Rs. 59,000 made by the assessing officer on account of unpaid sales-tax liability ?

(2).Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in directing the assessing officer to allow deduction if the assessee had made the payment before the due date for filing the return u/s 139(1) and had filed proof of having paid the sales-tax along with the Income Tax return filed by it despite the fact that the above proviso to section 43B has been inserted with effect from Ist April, 1988."

We heard the learned counsel for the parties and perused the material and the case law our attention was invited to.

We find that the answer(s) to the referred questions, in both the applications, is no longer res integra. They stand squarely covered in favour of the assessee and against the department by the decision of this court in the case of Commissioner of Income Tax Vs. Achaldas Dhanraj and Sanklecha Brothers, and of the Apex Court in the case of Allied Motors (P.) Ltd. Vs. Commissioner of Income Tax, Delhi, . The Apex Court has held that deduction on account of tax, duty, cess or fee is to be made on actual payment basis and the first proviso to section 43B and Explanation 2, which both were required to be read together as giving effect to the true intention of section 43B, were, on application of the rule of reasonable construction, retrospective in their operation. The proviso clarifies the position that sums paid after accounting year but before the due date of submission of the return were deductible business expenditure. In view of this authoritative pronouncement by the Apex Court on the controversy involved in the referred questions, the question as referred to us in both these applications, are required to be answered in favour of the assessee and against the revenue and we do accordingly.