Section 43B and sales tax payments: timely payment under local law avoids disallowance, with retrospective amendment applying to the year in issue.

Section 43B did not require disallowance of sales tax liability where the amount was paid within the time permitted under the relevant sales tax law, so the deduction was allowed. The amended section 43B, effective from 1 April 1988, was also treated as retrospectively applicable to assessment year 1987-88, with the result that the assessee succeeded on both questions and the Tribunal's view was sustained.

---

---

Issues: (i) Whether unpaid sales tax liability paid within the time allowed under the relevant sales tax law could be disallowed under section 43B of the Income-tax Act, 1961. (ii) Whether the amended provisions of section 43B introduced with effect from 1 April 1988 applied retrospectively to assessment year 1987-88.

Issue (i): Whether unpaid sales tax liability paid within the time allowed under the relevant sales tax law could be disallowed under section 43B of the Income-tax Act, 1961.

Analysis: The liability in question had been discharged within the period permitted by the relevant sales tax law. The statutory object of section 43B did not require disallowance where the tax was paid within the prescribed time under the applicable sales tax regime.

Conclusion: The disallowance was not warranted and the finding was in favour of the assessee.

Issue (ii): Whether the amended provisions of section 43B introduced with effect from 1 April 1988 applied retrospectively to assessment year 1987-88.

Analysis: The amended provision was held to govern the assessment year under consideration notwithstanding that the amendment took effect from 1 April 1988. The court treated the amendment as having retrospective application to the assessment year 1987-88.

Conclusion: The amended provisions of section 43B applied retrospectively to assessment year 1987-88, in favour of the assessee and against the Revenue.

Final Conclusion: The reference was answered for the assessee on both referred questions, and the Tribunal's view was sustained.

Ratio Decidendi: Where sales tax liability is paid within the time allowed under the relevant sales tax law, section 43B does not mandate disallowance, and the amendment to section 43B was treated as retrospectively applicable to the assessment year in question.

---