KUMAR SENGUPTA,J. - (1.) IN this reference under S. 256(1) of the IT Act, 1961, for the asst. yr. 1985-86, the following question of law has been referred to this Court : "Whether, on the facts and in the circumstances of the case and on a correct interpretation of the law, and particularly in view of the insertion of Expln. 2 w.e.f. 1st April, 1984, the Tribunal was justified in holding that the 1st proviso to S. 43B of the IT Act, 1961, introduced by the Finance Act, 1987 w.e.f. 1st April, 1988, would be applicable for the asst. yr. 1985-86 also ?"
(2.) THE facts are that on examination of the assessment records of the assessee for the asst. yr. 1985-86, for which the previous year ended on 30th June, 1984 the CIT found that in the assessment completed under S. 143(3) on 4th Nov., 1985 on a total income of Rs. 1,03,750 the ITO had not considered the applicability of the provisions of S. 43B of the IT Act, 1961 in respect of Andhra Pradesh Sales-tax liability shown under the head other liability Hyderabad Branch to the extent of Rs. 1,62,700. Proceedings under S. 263 of the Act were initiated and the assessee's counsel was heard. The CIT held that the amount of Rs. 1,62,700 was not admissible as a deduction under S. 43B of the Act since, admittedly, the said sum was not paid and had remained as a liability taken to the balance sheet of the assessee for the year under consideration and that it would be admissible only in the year in which it is paid. However, from the records the CIT found that the assessee had an opening balance of Rs. 27,472 in the said account which had remained unpaid in the earlier year and had been paid in the relevant previous year. Therefore, he held that the assessee was entitled to the deduction of the said amount of Rs. 27,472. He directed the ITO to recompute the income by enhancing it by a sum of Rs. 1,35,228 (Rs. 1,62,600 minus Rs. 27,472). On appeal, the Tribunal following its order in the case of ITO vs. Lokhandwala (1989) 80 CTR (Trib) (Ahd) 90 : (1989) 31 ITD 305 (Ahd) held that the assessee would be entitled to deduction of the amounts duly paid out of Rs. 1,62,700 well before the date of furnishing the return of income for the asst. yr. 1986-87. In that view, the Tribunal modified the order of the CIT passed under S. 263 of the Act and directed the ITO to follow the decision of the Tribunal reported in (supra) and allow necessary relief to the assessee while considering the amount of Rs. 1,35,228. This question is now concluded by the decision of a Division Bench of this Court in the case of CIT vs. Jagannath Steel Corpn. (IT Ref. No. 104 of 1989) where the judgment was delivered on 20th Dec., 1990. Following the said decision, we answer the question in this reference in the affirmative and in favour of the assessee. There will be no order as to costs.;