# The Commissioner of Income Tax, Bareilly & another v. M/s C.L.Gupta & Sons

- **Citation:** (2002) 3 ILRA 912
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2002-11-21
- **Case number:** Income Tax Appeal No. 122 of 2001
- **Bench:** S.K. Sen, C.J. S.Rafat Alam
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/the-commissioner-of-income-tax-bareilly-another-v-m-s-c-l-gupta-sons-39462
- **Pages:** 6

## Headnote

Income Tax Act 1961 Section 260A-
Section
43-B-
Deduction
of
Rs.
3,56,541/- claimed by assessee- towards
custom duty- for assessment year 198889- not allowed by Assessing Officer as
the payment was made in March 1987-
appeal dismissed on the ground- the
order is not appealable- both orders set
a
side-
deduction
held
permissible
appeal allowed .(Held Para10).

In view of clear provisions of law, the
deduction cannot be allowed in the
assessment year 1988-89. In our view,
both the learned Income Tax Appellate
Tribunal as well as the Commissioner of
Income Tax (Appeals) fell in error in
holding that since the assessee firm
debited the cost of the goods imported
including the duty paid on delivery of
goods in the trading account in April
1987, and before the actual delivery of
the goods, the value of the goods and
custom duty paid thereon was shown in
the balance sheet as document in hands
therefore
the
deduction
should
be
allowed in the assessment year 1988-89,
is contrary to the prescription of law.
Case law discussed:
(1997)224 ITR-677
(2002) 254 ITR-498

## Text

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912 INDIAN LAW REPORTS ALLAHABAD SERIES [2002
17. In view of the foregoing
discussions, we do not find any merit in
the Special Appeal and it is dismissed.

However, there shall be no order as
to costs.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD NOVEMBER 21, 2002

BEFORE
THE HON'BLE S.K. SEN, C.J.
THE HON'BLE S.RAFAT ALAM, J.

Income Tax Appeal No. 122 of 2001

The
Commissioner
of
Income
Tax,
Bareilly and another

...Appellants
Versus
M/s C.L. Gupta & Sons, Moradabad

 ...Respondents

Counsel for the Appellate:
Sri A.N.Mahajan, S.C.

Counsel for the Respondents:
Sri Vikram Gulati

Income Tax Act 1961 Section 260A-
Section
43-B-
Deduction
of
Rs.
3,56,541/- claimed by assessee- towards
custom duty- for assessment year 198889- not allowed by Assessing Officer as
the payment was made in March 1987-
appeal dismissed on the ground- the
order is not appealable- both orders set
a
side-
deduction
held
permissible
appeal allowed .(Held Para10).

In view of clear provisions of law, the
deduction cannot be allowed in the
assessment year 1988-89. In our view,
both the learned Income Tax Appellate
Tribunal as well as the Commissioner of
Income Tax (Appeals) fell in error in
holding that since the assessee firm
debited the cost of the goods imported
including the duty paid on delivery of
goods in the trading account in April
1987, and before the actual delivery of
the goods, the value of the goods and
custom duty paid thereon was shown in
the balance sheet as document in hands
therefore
the
deduction
should
be
allowed in the assessment year 1988-89,
is contrary to the prescription of law.
Case law discussed:
(1997)224 ITR-677
(2002) 254 ITR-498

(Delivered by Hon'ble S.Rafat Alam, J.)

1. This appeal is under Section 260A of the Income Tax Act, 1961 (in short
the Act) against the judgment and order of
the Income Tax Appellate Tribunal dated
11.2.1999 in ITAT
No.
6797/D/92
whereby the appeal of the revenue
appellant challenging the order of the
Commissioner Income Tax (Appeals) was
dismissed.

2. The short question involved in
this appeal is as to whether in view of the
provisions contained in Section 43-D of
the Act, the assessee can claim deduction
for the sum paid against the custom duty
in previous years. In other words, whether
the benefit for the sum paid against the
custom duty can be claimed in the
subsequent year or the benefit of such
deduction can only be allowed in the year
in which the actual payment is made.

3. The admitted fact, in brief, is that
in the assessment proceeding for the
assessment year 1988-89 the Assessing
Officer found that the assessee debited a
sum of Rs.3,56,541/- in March 1987
being the custom duty paid in relation to
the import of brass scrap weighing 17.443
kg. It was disclosed by the assessee that
the aforesaid brass scrap had been shipped
from Rotter Dam vide bill of lading dated
7.1.1987. The custom house agent of the
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3 All] The Commissioner of Income Tax, Bareilly & another V. M/s C.L.Gupta & Sons 913
assessee was Frakcht- Forwardes and
through
them
custom
duty
of
Rs.2,87,393/- was paid in the beginning
of March, 1987 and further additional
duty
of
Rs.69,148/-
was
paid
on
27.3.1987. The aggregate of two amounts
comes to Rs.3,56,541/- . The assessee
thus claimed deduction of the above
amount in the assessment year 1988-89
which was not allowed by the Assessing
Officer on the ground, inter alia, that in
view of the provisions contained in
section 43-B of the Act, the claim of
deduction towards payment of custom
duty is permissible only, in which the
actual payment is made. Since the
payment was made in the month of
March, 1987, the deduction can be
claimed in the assessment year 1987-88
and not in the assessment year 1988-89,
and thus disallowed the deduction. The
assessee
being
aggrieved
with
the
assessment order preferred an appeal
before the Income Tax Commissioner,
Bareilly vide Appeal No. 13/OC(A)
MBD/80-91 on the ground inter alia that
in the accounts for the year ending on
31.3.1987 the goods and the custom only
paid has been shown under the document
in hand' and the custom duty paid was a
part of the value of the closing stock but
shown under the 'document in hand' as
the duty was fully paid only during the
relevant previous year and, therefore, the
provisions of Section 43-B of the Act is
not at all attracted in the facts of the case.
Further
the
case
of
the
assessee
respondent was that the goods were
finally released on 30.3.1987 on the
payment
of
additional
amount
of
Rs.20,530/- and therefore, the custom
duty, even though paid partly earlier,
should be treated to have been paid during
the relevant previous year.

4. The Income Tax Commissioner
(Appeals), Bareilly, having heard the
parties, was of the view that since the cost
of goods and the custom duty paid
thereon in the proceeding year was
directly shown in the balance sheet on the
assets side, does not preclude the assessee
to debit the entire cost of goods alongwith
custom duty to the trading account of the
year under appeal after release of goods
by the Customs in the month of April,
1987 and, therefore, the provision of
Section 43-B of the Act is not applicable
in the facts and circumstances of the
present case. The learned Income Tax
Commissioner (Appeals) was further of
the view that Section 43-B applies where
the deduction is claimed towards any tax
or duty, which has actually been not
claimed within the prescribed limits.
Since in the case in hand the custom duty
was paid in the proceeding year in respect
of consignment of goods which was
actually delivered to the assessee on
22.4.1987 relevant to the assessment year
in the appeal, the learned commissioner
(Appeals)
was
of
the
view
that
disallowance of Rs.3,56,541/- does not
deserve to be sustained and thus allowed
the appeal. The revenue went in appeal
against the aforesaid order of the learned
Income Tax Commissioner (Appeals)
before the Income tax Appellate Tribunal,
who also vide order dated 11.2.99 in
ITAT No. 6797/D/92 upheld the order of
the learned commissioner (Appeals) dated
6.7.1992 and dismissed the appeal. It is
against these two above orders this appeal
has been preferred by the revenue.

5. Sri A.N. Mahajan, learned
Standing counsel for the Income Tax
Department (Appellant) urged that the
sum of custom duty paid by the assessee
in March, 1987 is deductible only in the
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914 INDIAN LAW REPORTS ALLAHABAD SERIES [2002
year in which it is actually paid, i.e.
assessment year 1987-88 and not in the
assessment year 88-89 and, therefore,
both
the
learned
Income
Tax
Commissioner (Appeals) and learned
Tribunal have not correctly appreciated
the provisions contained in Section 43-B
of the Act which permits deduction of
sums paid in the year in which such sum
is actually paid by the assessee. In support
of his contention he placed reliance on a
judgment of the Apex Court rendered in
the case of Allied Motors (P) Ltd. versus
Commissioner of Income Tax reported
in (1997) 224 ITR 677 and; on another
judgment of Calcutta High Court in the
case of Commissioner of Income Tax
versus Berger Paints (India) Ltd. (No.1)
reported in (2002) 254 ITR 498. Relying
on the aforesaid two judgments it is urged
that in view of Section 43-B of the Act,
the sum paid towards tax, duty, cess or fee
under any law shall be allowed in
computing the income referred to in
Section 28 of that previous year in which
such sum is actually paid by the assessee
and, therefore, in the case in hand the sum
paid towards custom duty was deductible
only in the assessment year 1987-88 and
not in the assessment year 1988-89 which
is the subject matter of appeal.

6. On the other hand, Sri Vikram
Gulati, learned counsel appearing for the
respondent- assessee opposed the appeal
and submitted that admittedly the goods
were delivered to the respondent- assessee
only in the month of April, 1987 when the
balance amount of Rs.20,530/- on demand
made by the custom department was
actually paid. Thereafter, on the delivery
of the goods in April, 1987 proper entry
was
made
in
the
trading
account
maintained for the assessment year in
question, i.e. 88-89. It is submitted that
the deposit of Rs.3,56,541/- was paid in
advance and the final payment of the
remaining amount was actually made in
the month of April, 1987 and, therefore,
the custom duty paid in advance cannot
be considered in isolation and should be
linked to the actual delivery of the goods.
It is further submitted that both the courts;
below have recorded a finding of fact to
the effect that the customs duty was paid
in advance towards the delivery of goods
and if for any reason the goods could not
have been delivered to the appellant, the
custom duty so paid would become
refundable to the appellant, and therefore,
before the actual delivery of goods the
value of goods as also the custom duty
paid were shown in the balance sheet as
'document in hand'.

7. It is not in dispute that sum of
Rs.3,56,451/- was paid by the assesseerespondent in March, 1987 towards
custom duty in respect of imported brass
scrap and further sum of Rs.69,148/- was
paid in the month of April, 1987 towards
additional duty.

Section 43-B of the Act runs as
under :-

Certain deduction to be only on actual
payment.
Section 43-B "Not with standing 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 assess by
way of tax, duty, cess or fee, by whatever
name called, 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
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3 All] The Commissioner of Income Tax, Bareilly & another V. M/s C.L.Gupta & Sons 915
any provident fund or superannuation
fund or gratuity fund or any other fund for
the welfare of the employees, or

(c) any sum referred to in clause (ii) of
sub section (1) of Section 36, or

(d) any sum payable by the assessee as
interest on any loan or borrowing from
any
public
financial
institution,
in
accordance with the terms and conditions
of the agreement governing such loan or
borrowing.

shall be allowed (irrespective of
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 the 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) or clause (c)
or clause (d) which is actually paid by the
assesee 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 in cash or by issue
of cheque or draft or by any other mode
on or before clause (v-a) of sub section
(1) of Section 36, and where such
payment has been made otherwise than in
cash, the sum has been realized within
fifteen days from the due date.

Explanation 1- For the removal of
doubts, it is hereby declared that where a
deduction in respect of any sum referred
to in clause (a) of 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 Ist day of April,
1983, or any earlier assessment year) in
which the liability to pay such sum was
incurred by 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.

Explanation 2- For this purposes 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.

Explanation 3- For the removal of
doubts it is hereby declared that where a
deduction in respect of any sum referred
to in clause (c) or clause (d) 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 Ist day of April,
1988, 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
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916 INDIAN LAW REPORTS ALLAHABAD SERIES [2002
year in which the sum is actually paid by
him.

Explanation 4- For this purposes of
this section, the expression ' public
financial
institution'
shall
have the
meaning assigned to it in section 4 A of
the Companies Act, 1956 (1 of 1956).

8. From a close reading of section
43 -B it is apparent that deduction for any
sum payable by the assessee by way of
tax or duty under any law for the time
being in force, shall irrespective of the
previous year in which the liability to pay
sum
was
incurred,
be
allowed
in
computing the income of that previous
year in which such sum is actually paid by
the assessee. This section was inserted by
the Finance Act, 1983 and given effect
from Ist of April, 1984. It was enacted to
curb the practice of tax payers, who on
one hand claim the liability of deduction
on the ground that they maintain accounts
of mercantile on accrual basis and on the
other hand, they do not discharge the
liability and dispute the same. The
Hon'ble Supreme Court while considering
the provisions contained in Section 43-B
in the case of Allied Motors (P) Ltd.
versus Commissioner of Income Tax
(supra) observed that section 43-B was,
therefore, clearly aimed at curbing the
activities of those taxpayers, who did not
discharge their statutory liability of
payment of excise duty employers'
contribution to provident fund etc. for
long
period
of
time
but
claimed
deductions in that regard from their
income on the ground that the liability to
pay those amount had been incurred by
them in the relevant previous year. It was
to stop this mischief that section 43 B was
inserted.

9. Explanation I to Section 43 B is
for removal of doubts. It provides that
where a deduction in respect of any sum
mentioned in clauses (a) or (b) of Section
43 B is allowed in computing the income
of any previous year, being a previous
year relevant to the 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 Section 43-B in respect of such sum
on the ground that a sum has been
actually paid by him in that year. Section
43-B, therefore, clearly provides inter alia
that a deduction in respect of any sum
payable by the assesse by way of tax or
duty 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. The deduction thus in
computing the income shall be allowed in
the year in which such sum is actually
paid by the assessee irrespective of the
method of accounting adopted by the
assessee.

10. In the case in hand, admittedly
the
amount
of
custom
duty
of
Rs.3,56,451/- was paid by the assessee in
March, 1987 and, therefore, in terms of
Section 43B it is deductible only in the
year in which it is actually paid i.e. for the
assessment year 1987-88 irrespective of
the year in which the assessee incurred
the liability on the basis of method of
accounting regularly adopted by him; and,
therefore, in view of clear provisions of
law, the deduction cannot be allowed in
the assessment year 1988-89. In our view,
both the learned Income Tax Appellate
Tribunal as well as the Commissioner of
Income Tax (Appeals) fell in error in
holding that since the assessee firm
debited the cost of the goods imported
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3 All] G.M., Modipon Fibre Co. V. Narendra Pal Gahlot 917
including the duty paid on delivery of
goods in the trading account in April,
1987, and before the actual delivery of the
goods, the value of the goods and custom
duty paid thereon was shown in the
balance sheet as document in hands,
therefore the deduction should be allowed
in the assessment year 1988-89, is
contrary to the prescription of law.
Section 43-B in clear terms provides that
the deduction claimed by the assessee in
respect of any sum paid by way of tax,
duty, cess or fee, shall be allowed only in
computing the income referred to in
Section 28 of that previous year in which
it was actually paid, irrespective of the
previous year in which the liability was
incurred for payment of such sum as per
method of accounting regularly employed
by the assessee. For the purpose of
claiming benefit of deduction of the sum
paid against liability of tax duty, cess, fee
etc. the year of payment is relevant and is
only to be taken into account. The year in
which the assessee incurred the liability to
pay such tax, duty etc. has no relevance
and cannot be linked with the matter of
giving benefit of deduction under Section
43-B of the Act. In this view of the
matter, the appeal deserves to be allowed.

11. In the result, the appeal succeeds
and is allowed. The impugned order of the
learned Income Tax Appellate Tribunal
dated 11.2.1999 in ITA No. 6797/D/92
for the assessment year 1988-89, and the
order of the learned Commissioner of
Income Tax (Appeals), Bareilly dated
6.7.1992 in Appeal No. 13/OC (A)
MBD/90-91 are set aside. There shall,
however, be no order as to costs.
---------

APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD NOVEMBER 15, 2002

BEFORE
THE HON'BLE S.K. SEN, C.J.
THE HON'BLE R.K. AGARWAL, J.

Special Appeal No. 803 of 1993

General Manager, Modipon Fibre Co.

 ...Appellant
Versus
Narendra Pal Gahlot
 ...Respondent

Counsel for the Appellant:
Sri V.B. Singh
Sri P.S. Baghel
Sri Vijay Sinha
Sri Ravi Agarwal

Counsel for the Respondent:
Sri R.N. Singh
Sri A.K. Singh
Sri Prakash Gupta

Constitution of India- Article 226 read
with Article 12- Maintainability- worker
challenged dismissal order- passed by
G.M.-;
Modipon
fiber
Company-
manufacturing not a statutory company
created under any statute- may be public
share
holder,
but
business
of
manufacture and sale of fibers is not a
public
purpose-
writ
petition
not
maintainable.

Held- Para 17

We find that it is not in dispute that
Modipon Fiber Company is a company
incorporated under the Companies Act
and carries its activities in accordance
with the various enactments. It is not a
statutory company as it has not been
created under any statute to carry out
any specific purpose, though it may be a
public company commonly understood in
which
the
public
may
be
share
holders/member, but it does not get the