High Court Of Gujarat
CIT vs. Gujarat State Forest Development Corporation
Sections 37(1), 43B
Asst. Year 1985-86
R.S. Garg & M.R. Shah, JJ.
IT Ref. No. 258 of 1995
3rd August, 2006
Counsel Appeared
Manish R. Bhatt, for the Applicant : None, for the Respondent
JUDGMENT
R.S. GARG, J. :
At the instance of the Revenue, the Tribunal, Ahmedabad Bench “B” has made this reference on the following questions for opinion of this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the additional liability of Rs. 2,71,855 on account of royalty pertaining to asst. yrs. 1981-82 and 1982-83 was an allowable deduction in asst. yr. 1985-86, when the liability neither pertains to nor it was created or arose in the accounting period pertaining to the said assessment year ?”
2. From the very question, it would clearly appear that the payment of royalty in the sum of Rs. 2,71,855 was pertaining to asst. yr. 1985-86. The ITO observed that the assessee would not be entitled to seek any benefit flowing from s. 43B of the IT Act, 1961 as the liability was not in relation to the asst. yr. 1985-86, but, pertained to the asst. yrs. 1981-82 and 1982-83. He, accordingly, disallowed the said payment of royalty. Being aggrieved by the said order, the assessee preferred the appeal to the CIT(A). The learned Tribunal recorded a finding that the said amounts were paid within the statutory permissible time, which was following immediately after the end of the accounting year and, therefore, s. 43B would apply to the facts of the case.
3. The Tribunal on appeal held that s. 43B of the Act would apply with full force as the actual payment was made in the asst. yr. 1985-86 and the liability of the assessee was fixed and finalised on 2nd Jan., 1985.
4. The learned counsel for the Revenue submits that s. 43B of the Act would not apply to the facts of the present case, specially, because the liability did not pertain to the asst. yr. 1985-86, but, was in relation to the asst. yrs. 1981-82 and 1982-83.
5. As per the order passed by the Tribunal, it would clearly appear that the royalty payment in dispute relates to the asst. yrs. 1981-82 and 1982-83 and the matter was settled by the State Government vide its resolution dt. 2nd Jan., 1985 and the amount was required to be paid in the said assessment year.
6. Sec. 43B of the Act provides that notwithstanding anything contained in any other provision of the IT Act, a deduction otherwise allowable under the Act in respect of any sum payable by some assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, 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 that previous year in which such sum is actually paid by him. From a plain understanding of the section, it would be clear that the deduction, which is otherwise allowable, is to be allowed on actual payment of tax and such deduction would be allowed only after its payment. In the present matter, though the liability to pay the royalty was in relation to the asst. yrs. 1981-82 and 1982-83, but, the liability to pay the royalty was finalised on 2nd Jan., 1985 and, therefore, s. 43B of the Act would apply with full force if the royalty is paid in the said assessment year. It cannot now be disputed by anybody that the royalty is treated to be a tax and, therefore, for the purposes of sub-cl. (a) of s. 43B, it would be inclusive in the term “tax” even if it is called by any other name.
7. It is also to be seen that in the matter of CIT vs. Nagri Mills Co. Ltd. (1958) 33 ITR 681 (Bom), judgment delivered on 28th Sept., 1957, before the division and bifurcation of the State of Bombay, the Bombay High Court has observed as under : “We have often wondered why the IT authorities in a matter such as this where the deduction is obviously a permissible deduction under the IT Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different; but in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction in respect of bonus was granted in the asst. yr. 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the asst. yr. 1953-54, should be a matter of no consequence to the Department; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the references that come up to us every now and then, the Department appears to delight in raising points of the character which do not affect the taxability of the assessee or the tax that the Department is likely to collect from him whether in one year or the other.”
8. For the reasons aforesaid, we hold that the authorities were justified in allowing the deduction for the asst. yr. 1985-86. The reference is answered against the interest of the Revenue. It stands disposed of accordingly. No costs.
[Citation : 288 ITR 28]
