Madhya Pradesh High Court
Asstt. Cit vs Perfect Pumps (P) Ltd. on 5 September, 2006
Author: N.K. Mody
Bench: N.K. Mody
ORDER S.K. Kulshrestha, J.
1. This order will also govern the disposal of IT Appeal No. 41 of 2004, IT Appeal No. 44 of 2004, IT Appeal No. 55 of 2004, IT Appeal No. 56 of 2004, IT Appeal No. 57 of 2004 and IT Appeal No. 70 of 2004.
2. For convenience facts have been taken from IT Appeal No. 40 of 2004.
3. The assessee, a limited company, had filed return for assessment year 1991-92 on 31-12-1990 disclosing income of Rs. nil. However, the income chargeable to tax under Section 115J was shown at Rs. 57,430. The assessment was framed under Section 143(3) on 30-9-1996 including total income at nil. However, on scrutiny of the case records it was noticed that liability for sales-tax amounting to Rs. 2,45,813 was deducted to P&L a/c and claimed as deduction but the payment thereof was not made but was claimed to be covered under sales-tax deferment scheme of the Government. The assessment was reopened under Section 147 vide notice under Section 148 dated 29-3-1995 to disallow the said claim as it was apparently hit by the provisions of Section 43B of the Income Tax Act as per circulars of CBDT. It is this part of the order which is under challenge in this appeal which has been admitted on the following questions:
1. Whether on the facts and circumstances the Tribunal erred in holding that Circular No. 674 ((1994) 116 CTR (St) 9) has no application in the present case ?
2. Whether on the facts and in the law the Hon'ble Tribunal was justified in allowing Rs. 2,45,813 on account of sales-tax: liability under Section 43B, even though the prescribed authority under Sales-tax Act passed order of deferment of sales-tax and its conversion into loan in a later year falling beyond the time limits prescribed under Section 43B of the Income Tax Act ?
4. Learned Counsel for the respondent have invited attention to the departmental circular relevant to the point relating to sales-tax deferment scheme. As required a special provision was introduced as Clause (3) in which such deferral schemes notified by the State Government through the Government orders which meet the requirement of the Board's Circular No. 496 dated 25-9-1987 1 (1988) 68 CTR (St) 109), in effect though in a different form. According to the Board the amount of sales-tax liability converted into loan may be allowed as deduction in the assessment for the previous year in which such conversion has been permitted by or under the Government orders.
5. It is not disputed that in all these cases assessees have availed deferment facility of tax under the provisions of Section 22D of the M.P. General Sales-tax Act. The contention raised is that Section 43B contemplates actual payment befored eduction of the amount is claimed. In this connection the learned Counsel have invited attention to para 4 which states that the matter has been examined in consultation with the Ministry of Law and the various State Governments. The Ministry of Law has opined that if the State Governments make an amendment in the Sales-tax Act to the effect that the sales-tax deferred under the scheme shall be treated as actually paid, such deeming provision will meet; the requirement of Section 43B. Accordingly, the State Government amended the M.P. General Sales-tax Act and Section 22 providing for deferment facility by adding Sub-section (3B). According to Sub-section (3B), notwithstanding anything contained in any other provision of the Act but subject to the conditions as may be prescribed, a registered dealer who belongs to any categories specified in Section 22D and has been granted the facility of deferment of payment of tax is liable to pay tax under the provisions of Sub-section (2) or Sub-section (3) or Sub-section (4) and if a loan liability equal to the amount of the tax payable by the dealer as aforesaid for the period of eligibility to avail of the said facility has been created by any agency or agencies as the State Government may, by general or special order, specify then such tax shall be deemed to have been paid in accordance with the provisions of Sub-section (2) or Sub-section (3) or Sub-section (4), as the case may be. In short provision was introduced for conversion and notwithstanding that the tax was deferred, it would be deemed to have been paid for the purposes of Section 43B.
6. Attention has also been invited to the decision in CIT v. K.N. Oil Industries in which after discussing the provisions made in the circular this Court held that whereever such amounts under the deferred payment scheme are there in the State then the assessee will be entitled to the benefit of deduction and the provisions of Section 43B of the Act will not come in the way of the assessee. This decision was rendered in the light of CBDT Circular No. 496 dated 25-9-1987. It was observed that the assessee was entitled to retain the sales-tax collected from customers for a period of ten years and for the purposes of the Sales-tax Act and also for the purposes of Section 43B of the Act the amount shall be deemed to have been paid. Thus, the sum and substance of the above circulars was that not only the provision made or amendment of Section 22D and incorporating Sub-section (3B) and Section 22, even as per the earlier decision of the court in CIT v. K.N. Oil Industries (supra) there was deeming provision with regard to the payment of tax for the purposes of conversion of Section 43B of the Income Tax Act. In this view of the matter, the Tribunal did not err in deleting the addition made by the subordinate authorities. We are, therefore, of the view that amount of deferred tax though retained shall be deemed to have been paid within the meaning of Section 43B and would be eligible for allowance as per law.
7. In CIT v. Bhagwati Autocast Ltd. the Gujarat High Court has also held that amount of unpaid sales-tax is not to be disallowed. Following the decision of Gujarat High Court, the Punjab and Haryana High Court in view of the amendment in Sales-tax Act treating amounts retained as actually paid has observed that amounts retained under scheme cannot be disallowed under Section 43B.
8. In view of the above discussion, we find no substance in the revenue's appeal. The appeals are dismissed but with no order as to costs.
This order be retained in IT Appeal No. 40 of 2004 and a copy each be placed in the record of connected Appeal No. 41 of 2004, IT Appeal No. 44 of 2004, IT Appeal No. 55 of 2004, IT Appeal No. 56 of 2004, IT Appeal No. 57 of 2004 and IT Appeal No. 70 of 2004.