Actual payment under section 43B includes excise duty deposited in account current and unutilised MODVAT credit.

Advance deposit of central excise duty in the prescribed account current, together with unutilised MODVAT credit, was treated as actual payment for section 43B purposes because the amount stood credited to the Revenue and was no longer under the assessee's control. The Court applied the principle that the statutory object of section 43B is met when duty is irretrievably deposited, even if later adjusted against clearances, and that such deposit is not a mere advance where the excise liability has already crystallised and the amount is non-refundable. The disallowance was therefore held unsustainable and the deduction was allowed.

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Issues: Whether advance deposit of central excise duty and unutilised MODVAT credit standing in the account current constituted actual payment of duty so as to qualify for deduction under section 43B of the Income-tax Act, 1961.

Analysis: The Court followed the Supreme Court's view that deposit of central excise duty in the prescribed account current is a statutory payment mechanism and, once deposited, the amount stands credited to the Revenue and is not under the assessee's control. The deduction under section 43B depends on actual payment, and the legislative object is satisfied when the duty is irretrievably deposited, even if adjustments are made later against clearances. The Court also relied on its earlier view that duty deposited in the account current cannot be treated as a mere advance when the liability has already crystallised on manufacture and the amount is non-refundable.

Conclusion: The advance deposit of excise duty and the unutilised MODVAT credit qualified as actual payment for section 43B purposes, and the disallowance was not sustainable; the issue was decided in favour of the assessee.

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