Double taxation and section 43B relief: refund interest and employee liability provisions were deleted after proof of prior assessment and actual payment.

Interest on an income-tax refund arising from erstwhile Indian branches was held not taxable again in the assessee's hands after amalgamation, because the same receipt had already been assessed in the hands of the former foreign entity and book credit did not change its tax character. The principle applied was that the same income cannot be taxed twice in different hands, and accounting entries are not conclusive of taxability. Long service award and deferred bonus provisions were also allowed under section 43B because the assessee showed that the underlying liabilities had been actually discharged during the year, making the disallowance unsustainable.

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Issues: (i) Whether interest on income-tax refund arising from the erstwhile Indian branches, after amalgamation, was taxable in the assessee's hands despite having been offered to tax in the hands of the former foreign entity; (ii) Whether the disallowance of long service award and deferred bonus provisions was sustainable under section 43B of the Income-tax Act, 1961.

Issue (i): Whether interest on income-tax refund arising from the erstwhile Indian branches, after amalgamation, was taxable in the assessee's hands despite having been offered to tax in the hands of the former foreign entity.

Analysis: The interest refund was found to have been assessed and taxed in the hands of the Netherlands entity, and the Revenue did not controvert that position. The mere credit of the refund into the assessee's bank account after amalgamation did not alter the character of the receipt or make it taxable again in the assessee's hands. The governing principle applied was that the same income cannot be taxed twice in the hands of different persons, and entries in the books of account are not conclusive of taxability.

Conclusion: The addition relating to interest on income-tax refund was unsustainable and was deleted in favour of the assessee.

Issue (ii): Whether the disallowance of long service award and deferred bonus provisions was sustainable under section 43B of the Income-tax Act, 1961.

Analysis: The relevant provisions had been created in earlier years and were disallowed then for non-payment within the prescribed time. The assessee placed material to show that the liabilities were discharged during the year and that the amounts were claimed on payment basis. The Tribunal accepted the documentary support and held that the assessee had substantially established actual payment, bringing the claim within section 43B.

Conclusion: The disallowance of long service award and deferred bonus was deleted in favour of the assessee.

Final Conclusion: The Tribunal granted full relief by deleting both additions and allowing the appeal.

Ratio Decidendi: Where the same income has already been assessed and taxed in the hands of another identifiable assessee, it cannot again be brought to tax merely because it was credited in the recipient's books after amalgamation, and deductions covered by section 43B are allowable when the underlying liabilities are shown to have been actually discharged.

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