1991 (1) TMI 105 - HC - Income Tax

Explanation 2 to section 43B upheld as valid, allowing tax deductions only on actual payment; section 154 notice sustained

HC upheld the constitutional validity and retrospective operation of Explanation 2 to section 43B, holding that the legislative intent is clear: deduction ... Disallowance of the amount payable to the sales tax - Special Provision Restricting Allowance - Interpretation of section 43B - Explanation 2 is ultra vires - notice issued u/s 154 of the Income-tax Act to the petitioner whereby the Commissioner of Income-tax seeks to withdraw the deduction which was allowed under section 43B of the Income-tax Act - HELD THAT:- Merely because a provision of the Act is harsh, and we dare say that all provisions which levy tax are harsh, this is no ground for discarding one of the cardinal principles of interpretation of statutes which is that if the language is clear and unambiguous, then resort cannot be had to the aims and objects or to the Minister's speech with a view to interpret the provisions of an Act. It is only if there is any ambiguity in the language that, in order to understand the intention of the legislature, aid can be taken of the proceedings in Parliament including the aims and objects of the Act. Where, however, as in the present case, the language is plain, clear and unambiguous, the question of referring to the Finance Minister's speech in an effort to find out what is the intention of the Legislature does not arise. The intention of the Legislature is evident from the section itself. The intention is that deduction is to be allowed only when payment is actually made. By verbal gymnastics, we cannot seek to interpret the said provision in a manner to negate the purpose of the section itself. It is precisely in order to plug this loophole that Explanation 2 was inserted with retrospective effect. Merely because Explanation 2 plugs a loophole and brings the case of the petitioner within the ambit of section 43B cannot be a reason for us to hold that Explanation 2 is ultra vires. Parliament has the legislative competence to enact the said provision and it is open to Parliament to see that the loopholes, if any, in a fiscal enactment, are blocked. We do not find this provision as being arbitrary or discriminatory and is not violative of any of the fundamental rights and is not in conflict with any provision of the Constitution. Two views may have been possible at the time when Explanation 2 had not been inserted but once Explanation 2 has been inserted with effect from April 1, 1984, the ambiguity, if any, stood removed. We find no jurisdictional error in the issuance of the notice under section 154. Further more, with regard to the interpretation of section 154 and the merits of the case, it is open to the petitioner to raise such contentions before the authority itself and we see no reason why the petitioner should be allowed to abandon the proceedings under the Act and be allowed to take recourse to the proceedings under article 226 of the Constitution. Petition is dismissed. Issues involved: Challenge to notice issued u/s 154 of the Income-tax Act seeking to withdraw deduction allowed u/s 43B.Summary:The petitioner appealed before the Commissioner of Income-tax (Appeals) for the assessment year 1985-86, arguing against the inclusion of amounts collected as sales tax in its income. The Commissioner allowed the deduction under section 43B based on a decision of the Andhra Pradesh High Court. Subsequently, a notice u/s 154 was issued to withdraw this deduction after an amendment to the Income-tax Act. The petitioner argued that different interpretations of section 43B exist, citing a decision of the Patna High Court.In a separate case, the High Court interpreted section 43B as requiring the deduction for sales tax only when the payment is actually made, not when the liability is incurred. The Court disagreed with the Patna High Court's interpretation, emphasizing that clear language in the statute should guide interpretation, not subjective views on harshness. The Court also rejected the retrospective application of the proviso and upheld the validity of Explanation 2 under section 43B.The Court found the notice u/s 154 valid, stating that any ambiguity in interpretation was resolved by the insertion of Explanation 2. The petitioner was advised to address concerns within the tax authority rather than through constitutional proceedings. Ultimately, the petition was dismissed based on the above reasoning.