Advance excise duty deposits in a Personal Ledger Account count as actual payment for Section 43B deduction.

Advance deposit of excise duty in a Personal Ledger Account was treated as actual payment for deduction under Section 43B of the Income-tax Act, 1961. The Court reasoned that the deposit is a statutory mode of payment under the central excise procedure: once credited, the amount stands with the Revenue and is only adjustable against future clearances, with withdrawal tightly controlled. It is therefore not a mere book entry or a sum freely retained by the assessee. Because Section 43B permits deduction only on actual payment, the advance deposit satisfied that requirement and the deduction was allowed.

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Issues: Whether excise duty deposited in advance in the Personal Ledger Account constitutes actual payment for the purpose of deduction under Section 43B of the Income-tax Act, 1961.

Analysis: The advance deposit in the Personal Ledger Account is a statutory mode of payment under the central excise procedure. Once deposited, the amount stands credited to the Revenue and is adjusted only against future clearances, while withdrawal is restricted and subject to the Commissioner's reasons. The deposit is not a mere book entry or an amount freely retained by the assessee. The object of Section 43B is to allow deduction only on actual payment and to prevent deductions on accrual without payment. In this statutory setting, the advance deposit satisfies the requirement of actual payment. The consistent accounting practice followed by the assessee and accepted by the Revenue, together with prior High Court decisions in the assessee's favour, also supports the same conclusion.

Conclusion: Advance deposit of excise duty in the Personal Ledger Account constitutes actual payment within the meaning of Section 43B of the Income-tax Act, 1961, and the assessee is entitled to deduction.

Ratio Decidendi: Where a statutory excise deposit is made under a controlled payment mechanism and the amount stands irrevocably credited to the Revenue subject only to adjustment against duty liability, it constitutes actual payment for the purpose of deduction under Section 43B.

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