Deferred sales tax under section 43B required a reference where state law amendment was not examined

A question of law arose on whether unpaid sales tax under a deferred payment scheme was allowable and how section 43B of the Income-tax Act, 1961 operated. The circular relied on applied only where the relevant State sales tax law had been amended so that deferred sales tax under an incentive scheme was treated as actually paid for section 43B purposes. Because it had not been examined whether the Gujarat Sales Tax Act, 1969 contained such an amendment, the Tribunal should have been required to refer the question. The refusal to call for a reference was unsustainable, and the issue had to be placed before the High Court for consideration.

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Issues: Whether the Tribunal was justified in declining to refer the proposed question relating to allowability of unpaid sales tax under the deferred payment scheme and the operation of section 43B of the Income-tax Act, 1961.

Analysis: The circular relied upon was applicable only where the State sales tax law had been amended so that deferred sales tax under an incentive scheme was treated as actually paid for the purposes of section 43B. It had not been examined whether the Gujarat Sales Tax Act, 1969 contained such an amendment. In that situation, a question of law plainly arose and the High Court ought to have required the Tribunal to make a reference.

Conclusion: The refusal to call for a reference was unsustainable and the question had to be referred to the High Court for consideration.

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