R. Balia, J. - (1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, at the instance of the Commissioner of Income-tax, Jaipur, has referred the following question of law arising out of ITA No. 719/JP of 1988 relating to the assessment year 1985-86 : "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in setting aside the addition of Rs. 37,826 made under Section 43B with the direction that if the amount of sales tax is paid within the time allowed under the sales tax law, although after the close of the year, it shall be allowed as deduction ?"
(2.) THE facts relevant for determining the aforesaid question are that the asses-see has claimed deduction on account of the liability to pay sales tax amounting to Rs. 37,826 which had not been actually paid during the previous year relevant to the assessment year in question. THE assesses has claimed that as per the relevant sales tax law, the assessee has incurred the liability for the previous year and the payment of said sum was also made within the time allowed for such payment under the provisions of the Sales Tax Act before the submission of a return in time. He, according to law governing the said tax, was not a defaulter, yet by invoking Section 43B his claim for deduction of the said amount paid by way of tax has not been allowed in computing his income from profits and gains of business for the assessment year in question. He has claimed that it is not hit by Section 43B of the Income-tax Act, 1961. THE assessing authority did not agree with the contention of the assessee and disallowed the claim, inter alia, on the ground that since the amount of tax had actually not been paid in the previous year relevant to the assessment year to which the assessment related, the same cannot be allowed under Section 43B as deduction and can be allowed as deduction only in the year of actual payment. In appeal, the Commissioner of Income-tax (Appeals) had confirmed the order of the Income-tax Officer. However, the Tribunal, on second appeal before it, had accepted the contention of the assessee in principle. However, it was of the opinion that since sufficient material was not on record to find the actual date on which such payment was drawn/made, remanded the case back to the Assessing Officer with the direction that in case the Assessing Officer finds that the disputed amount of sales tax has been paid within the time allowed under the sales tax law, although after the close of the previous year, it shall be allowed as deduction. On an application being made by the Commissioner of Income-tax under Section 256(1) for making a reference of the aforesaid question of law for the opinion of this court, the Tribunal noticed that there is a conflict of opinion between various High Courts, the Delhi High Court supporting the view of the Revenue, whereas other High Courts have held in favour of the assessee and has referred the aforesaid question as a question of law for the opinion of this court. We have heard learned counsel for the parties.
(3.) SECTION 43B inserted by the Finance Act, 1983, with effect from April 1, 1984, reads as under : "SECTION. 43B. Certain deductions to be only on actual payment.--Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax or duty under any law for the time being in force, or. . . shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in SECTION 28 of that previous year in which such sum is actually paid by him." Later on, operation of Clause (a) was widened by substituting words "tax, duty, cess or fee by whatever name called," for the words "tax or duty" vide Finance Act, 1988 (No. 26 of 1988), with effect from April 1, 1989, and Clauses (c), (d) and (e) were also inserted from time to time, which are not relevant for the present. Relevant for the present case are the provisions one which was inserted by the Finance Act, 1987 (No. 11 of 1987), with effect from April 1, 1988, and modified along with the insertion of Clauses (c), (d) and (e), and Explanation 2, which was inserted vide Act No. 13 of 1989 with retrospective effect from April 1, 1984. The provision reads as under : "Provided that nothing contained in this section shall apply in relation to any sum referred to in Clause (a) or Clause (c) or Clause (d) or Clause (e) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under Sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return : . . . Explanation 2.--For the purposes of Clause (a), as in force at all material times, 'any sum payable' means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law." It reveals that the proviso has been added to Section 43B that nothing contained in Section 43B shall apply in relation to any sum referred to in Clause (a) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under Sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. Thereafter, Explanation 2 was also inserted defining the expression "any sum payable" used in Clause (a) as in force at all material times to mean a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. ;