Advance tax as deductible liability in capital employed computation under section 80J, with later instalments treated as debt on valuation date.

Advance tax instalments payable after the first day of the computation period were treated as deductible liabilities when computing capital employed under section 80J(1A)(III). The analysis applied the statutory deeming rule that advance tax becomes due on the payable date and followed the Supreme Court view that an instalment payable after the valuation date can still be a debt owed on that date. On that basis, later-due instalments were not excluded merely because their due dates fell after the computation date, and the Revenue's position was upheld.

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Issues: Whether advance tax instalments falling due after the first day of the computation period were deductible as a debt or liability while computing capital employed under section 80J(1A)(III) of the Income-tax Act, 1961.

Analysis: The liability in respect of advance tax was examined with reference to the statutory deeming provision in section 80J(1A)(III)(ii)(a), which treats such liability as becoming due on the date on which the advance tax is payable. The Court also followed the Supreme Court view that an advance tax instalment payable after the relevant valuation or computation date can nevertheless constitute a debt owed on that date. On that basis, the instalments falling due after the first day of the computation period could not be excluded from the deductible liabilities merely because their due dates were later.

Conclusion: The Commissioner (Appeals) was not right in directing that the advance tax liability should not be deducted. The issue was decided in favour of the Revenue.

Final Conclusion: Advance tax instalments payable after the first day of the computation period were held to be deductible liabilities in computing capital employed for section 80J relief, and the department's appeal succeeded.

Ratio Decidendi: For section 80J capital computation, advance tax that is payable after the relevant computation date can still be treated as a debt or liability on that date and deducted accordingly.

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