1986 (3) TMI 42 - HC - Income Tax

Deduction allowed for customs and excise duties under s.43B for 1983; s.141A limits provisional assessment and allows refund adjustment

Lakhanpal National Limited Versus Income-Tax Officer

HC allowed the petition, holding the assessee was entitled to deduction for customs and excise duties in the accounting year 1983 because the liabilities ... Entitlement to Refund of Advance Tax and Interest - mercantile method of accounting - newly added provision of section 43B - refund with interest at the rate of 15% per annum from April 1, 1984 - Provisional Assessment under section 141A - HELD THAT:- What is disputed on behalf of the respondent is that the amount of customs and excise duty on the value of the closing stock of the petitioner-assessee should not be permitted in the assessment year 1984-85 (accounting year ending on December 31, 1983), though actually paid in the year 1983, because the assessment of the closing stock of the year 1983 will be in the subsequent previous year which would be in 1984 and the relevant assessment year would be 1985-86. It is true that at the time of making the assessment for the assessment year 1985-86, the respondent will have to be careful in seeing that the petitioner does not claim further deduction for the sum for which deduction is already given. In this case, it is not the contention of the respondent that any sum payable under clause (a) of section 43B of the Act was at any time claimed by way of deduction in any previous year prior to 1983. In fact, the raw materials were imported and the goods were manufactured in the year 1983, and they were cleared also in the year 1983. Therefore, their liability accrued in the year 1983, and they also paid the sum in the year 1983. In that view of the matter, the Explanation to section 43B of the Act is also not attracted in the present case. What section 43B of the Act states is that irrespective of the fact that the liability is already incurred, that would be an admissible deduction only when the actual amount in that regard is paid. Therefore, it is clear that in the year 1983, when the goods including the raw material were imported and the finished goods lying at various depots were manufactured in the year 1983 (including the one under the closing stock), the liability to pay import duty and excise duty on the said goods was incurred by the petitioner-assessee. When that is so, it is also clear that the deduction of the said excise duty and import duty even on the closing stock was allowable in the accounting year 1983, but because of the specific language of section 43B of the Act which has an overriding effect, it could not have been claimed by way of deduction unless payment thereof was made and here, in this case, it is not the case of the respondent that the payment of the said duty is not made and, therefore, it is not allowable. Therefore, the submission of Mr. Shelat that deduction in respect of the amounts which are not allowable under commercial principles are claimed as deductions merely because they are paid, cannot be accepted. Section 141A of the Act also provides that while making such provisional assessment, the Income-tax Officer shall make adjustments to the income or loss declared in the return, inter alia, allowing any deduction, allowance or relief on the basis of the information available in such return, accounts and documents as is prima facie admissible, but is not claimed in the return, and also to disallow any deduction, allowance or relief claimed in the return which, on the basis of the information available in such return, accounts and documents is prima facie inadmissible. What is to be considered is whether such deduction is prima facie admissible or not when in such provisional assessment the refund is granted and if it is subsequently found to have been wrongly granted as per the provisions of subsection (4) of section 141A of the Act, whether the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of the Act shall apply accordingly. Sub-section (5) of section 141 A of the Act also gives clear protection in dealing with the matter at the time of regular assessment providing that nothing done or suffered by reason or in consequence of any provisional assessment made under this section shall prejudice the determination, on the merits, of any issue which may arise in the course of the regular assessment. Thus, we are of the opinion that in this case, the respondent Income-tax Officer has failed in discharging his statutory duty in making the provisional assessment under section 141A of the Act. One of the grounds raised by the respondent is that six months' time is over. That ground cannot be available to him. Otherwise, in every case, the Income-tax Officer may not pass any order within six months from the date of furnishing of the return and when a writ petition is filed it may be opposed on the ground that provisional assessment was to be made within the period of six months. That will be adding a premium on the conduct of the Income-tax Officer who does not discharge his statutory duty. Hence, that contention raised by the respondent cannot be accepted. Petition is allowed. Issues Involved:1. Entitlement to Refund of Advance Tax and Interest.2. Interpretation and Application of Section 43B of the Income-tax Act.3. Obligation of Income-tax Officer to Make Provisional Assessment u/s 141A.Summary:1. Entitlement to Refund of Advance Tax and Interest:The petitioner, a public limited company and an assessee under the Income-tax Act, 1961, sought a refund of Rs. 74,79,006 with interest at 15% per annum from April 1, 1984. The petitioner had paid advance tax and tax deducted at source totaling Rs. 74,79,006 for the accounting year ending December 31, 1983. The petitioner filed a return u/s 139(1) showing a loss of Rs. 75,84,532 for the assessment year 1984-85 and requested a refund u/s 141A. The Income-tax Officer did not respond, prompting the petitioner to escalate the matter to higher authorities.2. Interpretation and Application of Section 43B of the Income-tax Act:The petitioner argued that customs duty and excise duty paid in 1983 should be deductible for the assessment year 1984-85, despite the goods being part of the closing stock. The respondent contended that allowing such deductions would result in double deductions, contrary to section 43B, which mandates that deductions are allowable only in the year of actual payment. The court clarified that section 43B, with its non-obstante clause, overrides other provisions and allows deductions in the year of actual payment, irrespective of the accrual of liability. The court found that the petitioner was entitled to the deductions for the year 1983 as the duties were paid in that year, and no double deduction was claimed.3. Obligation of Income-tax Officer to Make Provisional Assessment u/s 141A:The court held that the Income-tax Officer failed to discharge his statutory duty by not making a provisional assessment within six months from the date of filing the return, as mandated by section 141A. The section requires the officer to make adjustments based on prima facie admissible information in the return and documents. The court emphasized that the officer's failure to act within the stipulated time cannot be used as a defense against the petitioner's claim. The court directed the Income-tax Officer to pass an order u/s 141A within eight weeks, considering the observations made in the judgment.Conclusion:The petition was allowed, and the Income-tax Officer was directed to pass an order u/s 141A within eight weeks. The petitioner was entitled to the costs of the petition.