INDIA CARBON LIMITED Vs. INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE facts leading to this writ application under Article 226 of the Constitution of India, in brief, are as follows. THE Inspecting Assistant Commissioner of Income-tax, while making assessment for the assessment year 1984-85, added a sum of Rs. 21,98,557 stating thus :

(2.) THE amount of sales tax appeared in the balance-sheet on the liabilities side to the income of the petitioner-company. THE petitioner did not claim the added amount as deduction ; nor did he charge it to the profit and loss account. It appears that the addition was made in view of the provisions under Section 43B of the Income-tax Act. Section 43B introduced by the Finance Act, 1983, with effect from April 1, 1984, provides, inter alia, that a deduction in respect of any sum payable by the assessee by way of tax or duty under any law for the time being in force shall be allowed from the income of the previous year in which such sum is actually paid irrespective of the previous year in which the liability to pay such sum was incurred.

(3.) SECTION 43B declares that taxes and duties shall not be allowed as deduction from the income unless they are actually paid. It removes the doubt as to the meaning of the word "paid" according to the method Of accounting regularly employed by an assessee, in so far as deduction claimed in respect of any sum payable by way of tax or duty. The declaration does not, however, place any restriction on the business activities and on the system of accounting. Therefore, SECTION 43B shall only be attracted when the assessee claims deduction for any sum payable by way of tax or duty under any law for the time being in force, and, as such, where no such deduction is claimed nor charge made to the profit or loss account, there was no question of disallowing the amount taken to the balance sheet on the liabilities side as well as of "add back".