Deferred sales tax under the Gujarat scheme was treated as paid for section 43B purposes, so disallowance was not sustained.

Deferred sales tax liability under the Gujarat sales tax deferment scheme was treated as covered by the State Government resolution made operative from 1 April 1983, which converted the tax dues into a loan repayable by instalments and brought them within the Board's circular for section 43B purposes. The subsequent insertion of the second proviso to section 47(4) of the Gujarat Sales Tax Act was regarded as clarificatory, so the liability for the relevant assessment year fell within the scheme's benefit. As a result, the deferred sales tax was not disallowable under section 43B and the corresponding addition was deleted.

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Issues: Whether deferred sales tax liability under the Gujarat sales tax deferment scheme was hit by section 43B of the Income-tax Act, 1961.

Analysis: The resolution of the State Government, made operative from April 1, 1983, treated the deferred sales tax arrangement as one covered by the Board's circular, under which sales tax dues converted into a loan and repayable by instalments were to be treated as actually paid for the purposes of section 43B. The subsequent amendment inserting the second proviso to section 47(4) of the Gujarat Sales Tax Act was treated as clarificatory, and the liability in question fell within the benefit of the scheme for the relevant assessment year.

Conclusion: The deferred sales tax liability was not disallowable under section 43B and the addition was rightly deleted, in favour of the assessee and against the Revenue.

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