Sales tax deferment under a statutory scheme was held outside section 43B disallowance, and the addition was deleted.

Sales tax liability validly converted into deferred payment under a statutory incentive scheme, and supported by an entitlement certificate that remained operative, was not required to be disallowed under section 43B of the Income-tax Act, 1961. The tribunal applied the State deferment scheme and its earlier co-ordinate bench rulings in the assessee's own case, holding that the deferred tax amount did not attract section 43B disallowance. The addition was therefore deleted and the revenue's challenge failed.

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Issues: Whether the addition made on account of sales tax deferment was liable to be disallowed under section 43B of the Income-tax Act, 1961.

Analysis: The assessee's unit had been granted entitlement to sales tax deferment under the Karnataka Sales Tax Act, 1957, and the corresponding certificate showed that the tax liability was treated as deferred payment for a specified period. The record also showed that the benefit remained operative for the relevant assessment year and had not been withdrawn or cancelled. In these circumstances, the liability was covered by the State deferment scheme and the earlier co-ordinate bench decisions in the assessee's own case squarely applied.

Conclusion: The disallowance under section 43B was not warranted and the deletion of the addition was in law; the issue was decided in favour of the assessee.

Final Conclusion: The revenue's challenge to the deletion of the sales tax deferment addition failed, and the assessment addition was not sustained.

Ratio Decidendi: Where sales tax liability is validly converted into deferred payment under a statutory incentive scheme and supported by the requisite entitlement certificate, the amount is not to be disallowed under section 43B of the Income-tax Act, 1961.

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