Section 43B disallowance fails where sales tax becomes payable only after year-end and no deduction was claimed

Section 43B did not authorise disallowance of a sales tax liability for March where the relevant sales tax law made it statutorily payable only in April, after the close of the accounting year. Because the amount was carried in the sales-tax account, no provision was made in the profit and loss account, and no deduction was claimed in that year, there was no basis to add it back under section 43B. The addition was therefore deleted in favour of the assessee.

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Issues: Whether sales tax liability for March, payable under the relevant sales tax law only in April and not claimed as a deduction in the profit and loss account, could be disallowed under section 43B of the Income-tax Act, 1961.

Analysis: Section 43B allows deduction of tax or duty only in the year in which the sum is actually paid, but its operation depends on the amount being statutorily payable in the relevant previous year. Under section 15 of the Goa, Daman and Diu Sales Tax Act, 1964 read with rule 13 of the Goa, Daman and Diu Sales Tax Rules, the monthly sales tax for March became payable only within thirty days from the expiry of that month, i.e. in April. The amount was carried in the sales-tax account, no provision was made in the profit and loss account, and no deduction was claimed in the year under appeal. On these facts, section 43B could not be invoked to add back a liability which was not statutorily payable during the accounting year itself.

Conclusion: The disallowance under section 43B was not justified and the addition was deleted in favour of the assessee.

Ratio Decidendi: Section 43B does not permit disallowance of a tax liability that becomes statutorily payable only after the close of the relevant previous year, particularly where no deduction for that liability is claimed in that year.

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