Section 43B treatment of interest on delayed tax payment as part of tax limits deduction to actual payment.

Interest accrued on delayed payment of sales tax was treated as an integral accretion to the underlying tax liability and, in the statutory context of section 43B(a), as part of "tax" for disallowance purposes. The Court read the words "tax, duty, cess or fee" in light of the provision's object of preventing deduction of unpaid statutory dues, and relied on the sales tax law's deeming treatment of such interest as tax for collection and recovery. The resulting effect was that the assessee could claim deduction only in accordance with section 43B, i.e. on actual payment.

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Issues: Whether interest accrued on delayed payment of sales tax is part of "tax" for the purpose of disallowance under section 43B(a) of the Income-tax Act, 1961, and whether such interest, if otherwise deductible, can be claimed only on actual payment.

Analysis: The expression "tax, duty, cess or fee" in section 43B(a) was construed in its statutory context and in light of the object of the provision, namely to curb deductions claimed without discharge of statutory liabilities. Interest on delayed payment of tax was held to be an accretion to the underlying tax liability and, in the setting of the relevant taxing enactments, formed part of the sum payable by way of tax. The Court distinguished authorities dealing with different statutory schemes and held that the special context of section 43B supported inclusion of interest on delayed tax payment within the statutory embargo. The view taken by the Revenue was fortified by the earlier Rajasthan High Court decision and by the nature of the legal fiction under the sales tax law deeming interest payable as tax for collection and recovery.

Conclusion: Interest accrued on delayed payment of tax is part of tax within the meaning of section 43B of the Income-tax Act, 1961, and the assessee was not entitled to deduction otherwise than in accordance with that provision.

Ratio Decidendi: For the purpose of section 43B, a liability that is an integral accretion to the underlying tax liability is to be treated as part of tax when the statutory context and the object of the provision so require.

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