V.K. Singhal, J. - (1.) BOTH the matters are disposed of by this single order since the question of law involved is common.
(2.) IN D. B. INcome-tax Reference No. 9 of 1992, the following question of law has been referred by the INcome-tax Appellate Tribunal in respect of the assessment year 1987-88 under Section 256(1) of the INcome-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the INcome-tax Appellate Tribunal was legally justified in granting the benefits of amendment to Section 43B which was applicable with effect from the assessment year 1988-89 to the assessee in an appeal for an earlier year, thereby deleting the addition of Rs. 30,112 made under Section 43B ?" In D.B. Income-tax Reference No. 26 of 1992, the following two questions have been referred : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing that the amount of Rs. 92,122 being the unpaid sales tax on November 4, 1983, i.e., the last date of the previous year, should not be disallowed under Section 43B if it is found to have been paid (subsequently) within the time allowed under the relevant Sales Tax Act ? (2) Whether the amended provisions of Section 43B, introduced with effect from April 1, 1988, are retrospective and are applicable to the assessment year under consideration, i.e., the assessment year 1984-85 ?" The facts of Sanklecha Brothers are that the assessment in this case was completed under Section 143(3) on March 30, 1987. Subsequently, the Commissioner of Income-tax, Jodhpur, exercised his jurisdiction under Section 263 and set aside the order of the Income-tax Officer with a direction that an amount of Rs. 92,122 representing unpaid sales tax liability should be disallowed by invoking the provisions of Section 43B. The assessee challenged this order before the Income-tax Appellate Tribunal which held that if the sales tax remained unpaid at the end of the previous year, but has been paid within the time allowed under the Sales Tax Act, then it cannot be disallowed under Section 43B and, accordingly, directed the assessing authority to verify the allowability of sales tax collected and not paid within the previous year. The accounting year of the assessee closed on Diwali, 1983, and it was found that some of the payments were made beyond the period of one month allowed by the sales tax law and, as such, the disallowance was considered only in respect of those payments which have been made after the time allowed under the sales tax law. The appeal of the assessee was accordingly allowed. The Commissioner of Income-tax in his order under Section 263 found that a sum of Rs. 92,122 has been shown as liability in the balance-sheet in respect of the unpaid amount of sales tax. Out of this amount Rs. 76,258.50 was paid on November 28, 1983, December 30, 1983, and January 24, 1984, and the balance amount was adjusted against the refund amount due to the assessee. He relied on the decision in the case of CIT v. Saraswati Industrial Syndicate Ltd. [1973] 91 ITR 501 (Punj), where it was held that the sales tax liability is on the dealer who sells the goods and the purchasers are not responsible for payment of tax. The seller does not levy tax on the purchaser or collect tax from him and what he does is to increase price of the article so as to ensure that he is not a loser by paying sales tax. The amount of sales tax even though shown separately in the transaction is a part of the consideration which the seller charges on the transfer of property. Another decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 was also relied on wherein it was observed, "it is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as a trading receipt". The decision in Sinclair Murray and Co. P. Ltd. v. CIT [1974] 97 ITR 615 (SC) was also relied on for the proposition that the amount collected by the assessee as sales tax constituted his trading receipt and had to be included in its total income. In this case, it was also observed, if and when the assessee paid the amount collected to the State Government or refunded any part thereof to the purchaser, the assessee would be entitled to claim deduction of the sum so paid or refunded. The sales tax receipt by the seller is a trading receipt. On the basis of the decision of the apex court, the Commissioner of Income-tax came to the conclusion that the entire sales tax collected is a trading receipt and the deduction should have been allowed for the actual sales tax paid by the assessee. The unpaid liability on account of sales tax is liable to tax in view of the provisions of Section 43B and, as such, the power under Section 263 was invoked. The submission of learned counsel for the Revenue is that the amendment in Section 43B was made by the Finance Act, 1988, and was effective from April 1, 1989. The Tribunal has erred in giving retrospectivity to the said amendment which neither the Legislature has contemplated nor could be considered otherwise. In order to appreciate the argument of learned counsel for the Revenue the provisions of Section 43B are reproduced hereunder : "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 (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 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 : Provided that nothing contained in this section 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 : Provided further that no deduction shall, in respect of any sum referred to in Clause (b), be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation below Clause (va) of Sub-section (1) of Section 36. Explanation.--For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in Clause (a) or Clause (b) of this section is allowed in computing the income referred to in Section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him."
(3.) SECTION 43B was inserted by the Finance Act, 1983, and is applicable with effect from April 1, 1984, i.e., assessment year 1984-85. While interpreting the provisions of SECTION 43B, the Andhra Pradesh High Court in the case of Srikakollu Subba Rao v. Union of India [1988] 173 ITR 708 held that the provisions of SECTION 43B are not applicable to the market cess and the tax payable under the appropriate law after the close of the accounting year. In order to overcome this problem amendment was made by the Finance Act, 1988, by which the words "cess or fee, by whatever name called" were inserted in Clause (a) with effect from April 1, 1989. By the Finance Act, 1989, Explanation 2 was added retrospectively from April 1, 1984, which read as under : "For the purpose 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." The two provisos to this section were inserted by the Finance Act of 1987, with effect from April 1, 1988. It is the second proviso which was substituted by the Finance Act, 1989. The second proviso now is as under : "Provided further that no deduction shall, in respect of any sum referred to in Clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below Clause (va) of Sub-section (1) of Section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date." The dispute in the present case is in respect of the assessment year 1987-88 and on the basis of the contentions raised by learned counsel for the Revenue since the above proviso was added from April 1, 1988, that cannot be considered retrospective. ;