Deemed payment of deferred sales tax on conversion into loan satisfies Section 43B deduction requirements.

A State sales tax deferment scheme, issued under statutory authority and supported by a deeming notification, treated deferred sales tax as paid once the liability was converted into a loan. The Court accepted that this arrangement satisfied the substance of Section 43B, and the later amendment was treated as clarificatory. Circular No. 674 was relied on to support the view that such government orders and loan conversion meet the payment requirement even without a direct amendment deeming actual payment. The earlier authority was distinguished on the basis that the statutory amendment and conversion into loan were both established here, so the assessee was entitled to deduction.

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Issues: Whether the assessee was entitled to deduction under Section 43B in respect of sales tax deferred under the State Government's deferment scheme.

Analysis: The scheme was issued in exercise of the power under Section 7(2B) of the Rajasthan Sales Tax Act 1954, and the later notification inserted a deeming provision that where deferred sales tax liability was converted into a loan, the tax shall be deemed to have been paid. Circular No. 674 recognised that such Government orders and deeming conversion satisfy the requirements of Section 43B in substance, even though the mechanism differs from a direct amendment treating the tax as actually paid. The Court distinguished earlier authority on the basis that, in the present case, the statutory amendment and the conversion into loan were both established, and the amendment was treated as clarificatory.

Conclusion: The assessee was entitled to deduction under Section 43B for the deferred sales tax amount converted into loan, and the question was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Where a State deferment scheme, backed by statutory authority, deems deferred sales tax to have been paid upon conversion of the liability into a loan, the liability is treated as discharged for the purposes of Section 43B.

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