Sales tax paid before return due date allowed as deduction u/s 43B Explanation 2, favouring assessee

HC interpreted Explanation 2 to section 43B of the Income-tax Act, 1961, in the context of sales tax liability and its deductibility. The issue was whether sales tax collected but not yet paid to the Government by the end of the accounting year, but paid before the due date of filing the return, was allowable as a deduction. Relying on the majority view of other HCs, the Court held that such payment satisfies the condition under section 43B read with Explanation 2. Accordingly, the question was answered in the affirmative, in favour of the assessee and against the Revenue, upholding the assessee's claim to deduction.

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Issues Involved: Interpretation of Explanation 2 to section 43B of the Income-tax Act, 1961 regarding the allowance of sales tax amount paid after the close of the accounting period but before the due date of filing the return of income under section 139(1).

Judgment Summary:

Interpretation of Explanation 2 to section 43B:
The Tribunal referred the question to the High Court regarding the allowance of sales tax amount paid after the close of the accounting period but before the due date of filing the return of income. Various High Courts, including Andhra Pradesh, Patna, Kerala, Orissa, Calcutta, Gujarat, Karnataka, and Kerala, had ruled in favor of the assessee on this issue. However, the Delhi High Court had ruled against the assessee in similar cases. In line with the majority decisions of the High Courts favoring the assessee, the High Court of GAUHATI answered the question in the affirmative, supporting the assessee and ruling against the Revenue.

Transmission of Judgment:
The High Court directed that a copy of the judgment be transmitted to the Income-tax Appellate Tribunal. No costs were awarded in the case.

This judgment provides clarity on the interpretation of Explanation 2 to section 43B of the Income-tax Act, 1961, ensuring consistency with the decisions of various High Courts and upholding the rights of the assessee in similar cases.

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