Deductibility of tax arrears paid later: earlier-year liability cannot be claimed as a deduction in the year of payment.

Tax arrears payable for earlier years, even if discharged in the relevant accounting year, are not deductible in computing income for that year. A transport operator had claimed deduction of passenger and goods tax under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, including arrears relating to past years, but the claim for arrears was disallowed. Relying on earlier binding decisions, the HC held that such belated payment does not convert an earlier-year liability into a deduction for the year of payment, and answered the question against the assessee and in favour of the Revenue.

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Issues: Whether tax admittedly payable for earlier years but paid in the accounting year could be deducted in that accounting year.

Analysis: The assessee, a transport operator, claimed deduction of tax paid under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, including arrears relating to earlier years. The claim was disallowed below in respect of the arrears. Following earlier binding decisions holding that arrears of such tax, when paid in a later accounting year, are not deductible in computing income of that year, the Court accepted the Revenue's contention.

Conclusion: The first question was answered in the negative, against the assessee and in favour of the Revenue.

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