Court rules first proviso to Income-tax Act applies retrospectively, aligning with Supreme Court precedent

The High Court of Punjab and Haryana ruled in favor of the assessee, holding that the first proviso to section 43B of the Income-tax Act, 1961 should be applied retrospectively. The Court emphasized the remedial nature of the amendment and the need to interpret section 43B, the first proviso, and Explanation 2 together. This decision aligned with the Supreme Court's interpretation in a previous case and allowed the liability if payment is made before the due date specified under section 139(1).

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Issues involved: Interpretation of section 43B of the Income-tax Act, 1961 regarding the retrospective application of the first proviso, and the allowance of liability if payment is made before the due date prescribed under section 139(1).

Summary:
The High Court of Punjab and Haryana addressed a question referred by the Income-tax Appellate Tribunal regarding the interpretation of section 43B of the Income-tax Act, 1961. The Assessing Officer disallowed the claim of the assessee for sales tax/Central sales tax and PF as the payment was not made before the due date under section 139(1). The Commissioner of Income-tax (Appeals) upheld this decision, but the Tribunal ruled in favor of the assessee, stating that the proviso in question was retrospective from the assessment year 1984-85 onwards. The Tribunal remanded the matter to determine if payments were made before the due date specified in the Act.

The High Court found precedent in the Supreme Court case of Allied Motors P. Ltd. v. CIT [1997] 224 ITR 677, which highlighted the purpose of section 43B to address situations where taxpayers did not fulfill their statutory liability. The Court noted that the amendment by the Finance Act of 1987 was remedial and retrospective, as confirmed by Departmental Circular No. 550 dated January 1, 1990. The Court emphasized that section 43B, the first proviso, and Explanation 2 must be read together to give effect to the true intention of the provision. Therefore, the High Court ruled against the Revenue and in favor of the assessee based on the Supreme Court's interpretation.

In conclusion, the High Court held that the first proviso to section 43B of the Income-tax Act, 1961 should be applied retrospectively, allowing the liability if payment is made before the due date prescribed under section 139(1), in line with the remedial nature of the amendment and the intention of the legislation.

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