Section 43B disallowance limits liability to amounts payable by the assessee; intermediary collections are not its own tax burden.
Section 43B disallowance was held inapplicable to unpaid interest on a World Bank-linked loan where the liability had been paid to the State Government and the cited exceptions under clauses (d), (da) and (e) did not cover it on the facts. The later subsidy arrangement did not change the character of that interest liability for section 43B purposes, so the disallowance was deleted. Electricity duty collected from consumers was also treated as a levy on the consumers rather than a tax or duty payable by the assessee itself, because the assessee acted only as a collecting intermediary for remittance to the State Government. The deletion of that addition was therefore upheld.
Issues: (i) Whether unpaid interest on the World Bank-linked loan was disallowable under section 43B of the Income-tax Act, 1961. (ii) Whether electricity duty collected from consumers and adjusted against subsidy was disallowable under section 43B(a) of the Income-tax Act, 1961.
Issue (i): Whether unpaid interest on the World Bank-linked loan was disallowable under section 43B of the Income-tax Act, 1961.
Analysis: Section 43B permits deduction of specified liabilities only on actual payment. The disputed interest was found to have been paid to the State Government, not directly to the World Bank, and the statutory exceptions in clause (d), (da) or (e) did not cover interest payable to the State Government or World Bank on the facts found. Explanation 4 did not bring either entity within the relevant classes of covered institutions. The later subsidy arrangement was treated as a separate matter and did not alter the character of the interest liability for section 43B purposes.
Conclusion: The disallowance of unpaid interest was not sustainable and was deleted in favour of the assessee.
Issue (ii): Whether electricity duty collected from consumers and adjusted against subsidy was disallowable under section 43B(a) of the Income-tax Act, 1961.
Analysis: Section 43B(a) applies to a sum payable by the assessee by way of tax, duty, cess or fee. The electricity duty was held to be a levy on the consumer, with the assessee acting only as a collecting intermediary for remittance to the State Government. On that footing, the liability was not a tax or duty payable by the assessee itself. The adjustment against subsidy also supported the view that no disallowance was warranted on the facts accepted by the first appellate authority.
Conclusion: The deletion of the electricity-duty addition was upheld in favour of the assessee.
Final Conclusion: The assessee succeeded on the substantive grounds, while the Revenue's challenge failed, and the separate challenge to the reassessment validity became academic.
Ratio Decidendi: Section 43B applies only to liabilities specifically payable by the assessee within the enumerated categories, and amounts collected in a fiduciary or intermediary capacity for onward remittance are not disallowable as the assessee's own tax or duty liability.