Deferred sales tax treated as paid under section 43B where State scheme and CBDT circular covered the loan conversion.

Deferred sales tax converted into a loan under a State incentive scheme was treated as actually paid for section 43B where the Government resolution operated from an earlier date and the CBDT circular covered such conversion. The later insertion of the second proviso to the State sales tax provision was treated as clarificatory, reinforcing the treatment already available under the resolution and circular. On that basis, deletion of the section 43B addition for unpaid deferred sales tax was upheld in favour of the assessee and against the Revenue.

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Issues: Whether the deletion of the addition made under section 43B in respect of unpaid deferred sales tax was justified where the State Government's sales tax deferment scheme was in force from an earlier date and was later reflected in the statutory amendment deeming such tax to have been paid.

Analysis: The resolution issued by the State Government was made operative from an earlier date, and the Central Board of Direct Taxes circular provided that where sales tax payable was converted into a loan repayable by instalments, the amount would be treated as actually paid for the purposes of section 43B. The later insertion of the second proviso to the State sales tax provision was treated as clarificatory, supporting the view that the assessee's liability fell within the scheme already covered by the circular and the Government resolution.

Conclusion: The deletion of the addition under section 43B was upheld and the question was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Deferred sales tax converted into a loan under a State incentive scheme, when covered by the applicable Government resolution and CBDT circular, is treated as paid for the purposes of section 43B, and a later clarificatory statutory amendment may be applied to support that treatment.

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