Delhi H.C : The petitioner is a dealer in motor vehicle and its accounting year is the calendar year.

Counsel Appeared

Dr. A.M. Singhvi, for the Applicant : None, for the Respondent

B.N. KIRPAL, J.:

The challenge in this writ petition is to s. 43B of the IT Act as in force w.e.f. 1st April, 1984. The petitioner is a dealer in motor vehicle and its accounting year is the calendar year. In respect of the asst. yr. 1985-86 the accounting year ended on 31st Dec., 1984. With regard to the sales made for the quarter ending 31st Dec., 1984 the petitioner paid sales-tax on 31st Jan., 1985. The petitioner, however, claimed a deduction of the payment of sales-tax in the accounting year relevant to the asst. yr. 1985-86.

The ITO while applying s. 43B disallowed the said deduction claimed and added back the amount. On the basis of the said add back additional tax has been sought to be recovered from the petitioner. It is also contended that proceedings for penalty and levy of interest have also been initiated. Sec. 43B as it stood in the asst. yr. 1985-86 read as under : “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 the 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 s. 28 of the previous year in which such sum is actually paid by him. Explanation : For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in cl. (a) or cl. (b) of this section is allowed in computing the income referred to in s. 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.”

The reading of this section clearly shows that the deduction can be claimed only in the year in which the payment is actually made. In other words the deduction cannot be allowed as per the principles of mercantile system of accounting, namely, when the liability arises but now it can be allowed only in the year in which the tax is actually paid. In the present case, the tax having been paid on 31st Jan., 1985, it would be, in the case of the petitioner, in the accounting year ending 31st Jan., (sic), 1985 and corresponding to the asst. yr. 1986-87, that the deduction can be claimed.

It is submitted that this provision, namely, s. 43B is arbitrary and is impossible of compliance. It is true that there may be some difficulty in the petitioner paying sales-tax in respect of sales made towards the end of the quarter ending 31st Dec., 1984, but it is not as if the deduction to the petitioner is denied. The only thing what happens is that the deduction can be claimed in the year in which the tax is actually paid, namely, in the following assessment year, in the present case. The provision of law is very clear and unambiguous. There are various provisions under the IT Act where it has been stipulated that deductions would be allowed, in certain cases, only when the disbursements are actually made by the assessee. We do not find this to be an arbitrary exercise of power or an arbitrary provision. It is well known that books of accounts are maintained either on mercantile basis or on cash basis. The legislature has thought fit that with regard to the payment of sales-tax, the deduction is to be allowed only when the payment of sales-tax is actually made. Such a provision is not unknown to the IT Act and we do not find it unreasonable or arbitrary. It is submitted by Dr. Singhvi that the petitioner is being subjected to penalty proceedings and interest is also being charged. Whether the penalty is leviable or not is a matter to be gone into in those proceedings, which are independent and distinct from the assessment proceedings. We would not like to comment on that. All that has to be seen is whether the provision of law is clear and if it is then it was upto the assessee to follow it or not. If the assessee chooses not to follow that provision of law then consequences may follow. We find it difficult to accept the contention that because aforesaid consequences may ensue, due to non appliance with s. 43B, the said provision itself becomes arbitrary and ultra vires Art. 14 of the Constitution.

It was next submitted by Dr. Singhvi that amendment to s. 43B has been made in the year 1987 and this amendment, w.e.f. 1st April, 1988 is clarificatory in nature and by applying the said amendment the petitioner was entitled to relief. We are unable to agree with this submission. The amendment clearly states that it is w.e.f. 1st April, 1988. This being so it is not possible to give the amending provision retrospective effect w.e.f. 1st April, 1984. It was lastly contended that similar writ petition has been filed in this Court, being Civil Writ No. 776 of 1990 and in that case notice to show cause has been issued and stay was granted. We find that rule nisi has not been issued in that case, though limited stay has been granted. We have considered all the contentions raised by the petitioner before us in the present case and have heard the learned counsel for the petitioner at length and we do not find any merit in any of the contentions raised by him and, therefore, we see no reason as to why any notice or rule nisi should be issued. The petition is accordingly dismissed in limine.

[Citation : 187 ITR 703]