Section 43B proviso covers timely paid sales tax liability, preventing disallowance despite payment after the accounting year.

The first proviso to section 43B of the Income-tax Act applied to assessment year 1986-87, and a sales tax liability paid within the time allowed under the relevant sales tax law could not be disallowed merely because payment was not made within the accounting year. The Calcutta HC followed its earlier settled interpretation of section 43B and upheld the Tribunal's deletion of the disallowance, answering the reference in favour of the assessee.

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Issues: Whether the first proviso to section 43B of the Income-tax Act, 1961, applied to assessment year 1986-87 and whether the disallowance of sales tax liability paid within the time permitted under the relevant sales tax law was rightly deleted.

Analysis: The reference was governed by the earlier decision of the same court in which the effect of section 43B and its first proviso had already been settled. On that basis, the liability in question, having been paid within the due date prescribed under the relevant statutory provision, could not be disallowed merely because it was not paid within the accounting year. The Tribunal's view was consistent with that settled interpretation.

Conclusion: The first proviso to section 43B was applicable, and the deletion of the disallowance was correct. The questions were answered in the affirmative and in favour of the assessee.

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