Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961 ("the Act"), the following questions of law have been referred to this court : "1. Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 43B of the Income-tax Act, 1961, the learned Tribunal was justified in law in holding that the first proviso to Section 43B of the Income-tax Act, 1961, introduced by the Finance Act, 1987, with effect from 1st April, 1988, would be applicable to the assessment year 1984-85. 2. Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in law in setting aside the order of the learned Commissioner of Income-tax (Appeals) confirming the additions of Rs. 10,78,497 and Rs. 4,514 (sales tax Rs. 8,90,852, provision for turnover and purchase tax Rs. 1,28,000, E. S. I. provision Rs. 4,535, provident fund contribution Rs. 32,992, Baranagar Municipality tax Rs. 32,118 and Rs. 4,514 for losses of sales tax) under Section 43B of the Act and remitting the matter back to the Assessing Officer for re-examination in the light of the decision in ITO v. K.S. Lokhandwala [1989] 31 ITD 305 (Ahd.) of the Ahmedabad Bench of the Income-tax Appellate Tribunal." As it appears from the statement of case, the assessee is a limited company and the assessment year involved is 1984-85. The Assessing Officer disallowed the following amounts by invoking the provisions of Section 43B of the Act : JUDGEMENT_149_ITR218_1996Html1.htm There was a further disallowance of Rs. 4,514 out of the sales tax onfthe ground that the said amount represented merely a further provision for sales tax liability. The Commissioner (Appeals) confirmed these disallowances on the ground that unpaid sales tax, provision for turnover tax, purchase tax, provision for E. S. I. and provident fund contribution and the municipal taxes are disallowable by reason of the clear mandate of Section 43B, it being undisputed that the deductions were claimed not on the basis of payment but on the basis of provision. In further appeal before the Tribunal, the assessee indicated in the grounds of appeal that the liabilities had not been paid during the previous year as they did not become due for payment under the respective statutes. The Tribunal concluded the dispute observing as follows : "The Assessing Officer disallowed the sums of Rs. 10,78,497 and Rs. 4,514 under Section 43B of the Act on the ground that payments were not made during the year under appeal. The assessee, on the other hand, through the grounds of appeal has indicated that the payments were not due and, consequently, the payments were not made within the previous year of the assessee. The issue in this connection has been elaborately discussed by the Ahmedabad Bench in [1989] 31 ITD 305 and the guideline has been given there to see whether the amounts have been paid within the statutory period and/or within the period the return was filed by the assessee for the subsequent year. As the matter has not been examined from the said angle, the order of the Commissioner of Income-tax (Appeals) on these issues is set aside and the matter is referred back to the Assessing Officer for re-examination in the light of the decision in ITO v. K.S. Lokhandwala [19891 31 ITD 305 (Ahd) after allowing an opportunity of being heard to the assessee." As it would appear from its conclusion, the Tribunal took the view that the amendments to Section 43B as made by the Finance Acts of 1987 and 1989 should also apply with equal force to the assessment year earlier than the assessment year 1988-89. The provisos inserted by the Finance Act, 1987, with effect from April 1, 1988, relax the main provision of Section 43B by permitting deduction of the liabilities on account of (i) any tax, duty cess or fee ; (ii) any bonus or commission for services rendered ; (iii) any interest on borrowing from any public financial institution, if the payments for such liabilities are made even after the expiry of the previous year, but before expiry of the statutory time for filing the return in respect of such previous year. In order to sort out the possible anomalies and to prevent duplication of deduction, the Explanations have been inserted by the Direct Tax Laws (Amendment) Act, 1987, and, again, by the Finance Act, 1989.
(2.) The Tribunal evidently took the view that the provisions of Section 43B would not apply, where the assessee has not only deposited the amount within the statutory time limit provided by the relevant State legislation, but admittedly the amount in question has been deposited before the due date for furnishing the return of income under Section 139(1).
(3.) The Tribunal, therefore, directed the Assessing Officer to re-examine the question of allowability of the deductions on such interpretation of the provision.;