Interpretation of Tax Law: Payment Timing Impact on Allowability of Tax Collected.

The High Court interpreted section 43B of the Income-tax Act, 1961, ruling in favor of the assessee. The court held that if tax collected in the last month of the accounting year is paid within the stipulated period in the next assessment year, it is allowable. The Court upheld the decision of the Commissioner of Income-tax to delete the disallowance of sales tax amount not paid during the assessment year, as the tax payments were made within the statutory period in the subsequent accounting year.

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Issues involved: Interpretation of section 43B of the Income-tax Act, 1961 regarding the disallowance of sales tax amount not paid during the assessment year.

The Income-tax Appellate Tribunal, Delhi, referred a question of law u/s 256(1) of the Income-tax Act, 1961 to the High Court regarding the correctness of confirming the order of the CIT(A) deleting the addition made by the Assessing Officer u/s 43B for the assessment year 1984-85.

During the assessment year, the assessing authority disallowed a sales tax amount of &8377; 54,599 under section 43B as it was shown as payable but not actually paid. The Commissioner of Income-tax, on appeal, found that the tax payments were made within the statutory period in the next accounting year and deleted the disallowance, a decision upheld by the Tribunal.

The High Court, citing the case of Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677, held that if tax collected in the last month of the accounting year is paid within the stipulated period in the next assessment year, it is allowable. The Court answered the question in favor of the assessee and against the revenue, with no order as to costs.

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