1996 (6) TMI 34 - HC - Income Tax

Court rules in favor of Revenue on tax liability interpretation under Income-tax Act, 1961

Commissioner Of Income-Tax Versus A. Kunjumytheen Kunju

The court ruled in favor of the Revenue and against the assessee in interpreting section 43B of the Income-tax Act, 1961 for the assessment year 1984-85. ... Assessment Year Issues:Interpretation of section 43B of the Income-tax Act, 1961 for the assessment year 1984-85.Analysis:The judgment pertains to two income-tax references for the assessment year 1984-85, questioning the applicability of section 43B of the Income-tax Act, 1961. The primary issue revolves around whether the amounts in question should be brought to tax in the assessment year under consideration. The court highlighted the evolution of section 43B through various amendments introduced by the Direct Tax Laws (Amendment) Act, 1987, the Finance Act, 1988, and the Finance Act, 1989. The amendments significantly impacted the interpretation of the provisions of section 43B, especially concerning the liability to pay tax or duty incurred in the accounting year and the statutory payable status of the amount within that year.The court emphasized that the deeming provision introduced by the Finance Act, 1989, specifically through Explanation 2 to section 43B, clarified the definition of 'any sum payable.' The deeming provision, effective from April 1, 1984, expanded the scope of what constitutes a payable sum, even if not due under the relevant law within the accounting year. This clarification led to the conclusion that amounts, though not immediately payable, are deemed as income taxable for the accounting year if the liability to pay tax or duty was incurred in that year and subsequently paid by the assessee.Furthermore, the judgment referenced the case law of CIT v. Govindaraja Reddiar [1991] 187 ITR 417, which supported the interpretation of the legislative intent behind the amendments to section 43B. The court noted that the legislative intent aimed to alleviate hardships faced by certain taxpayers, particularly concerning the payment of sales tax for the last quarter of the previous year. The court's decision aligned with the statutory provisions and previous judicial interpretations, affirming that the assessees were not entitled to deductions and the amounts were taxable for the assessment year in question.Ultimately, the court ruled in favor of the Revenue and against the assessee in both references, concluding that the statutory provisions, case law, and legislative intent collectively supported the position that the amounts in question were taxable for the assessment year 1984-85. The judgment highlighted the need to forward a copy of the decision to the Income-tax Appellate Tribunal, Cochin Bench, as required by law.