2026 (3) TMI 544 - AT - Income Tax

Actual payment under Section 43B: adjustments remitted to Assessing Officer for factual verification and possible deduction.

Whether adjustments against excess royalty pre-payments amount to 'actual payment' for claiming deduction under section 43B is the central issue; the ... Allowability u/s 43B - liability of the assessee towards the royalty payment - addition made as assessee has shown the payment through the book entries which is not actual payment - CIT(A) has disallowed the claim of the assessee to the extent of the amount which was claimed by the assessee as adjusted against the excess royalty already paid by the assessee to the State Authorities on the grounds that these are not actual payment but only book entries - HELD THAT: - The Tribunal held that the CIT(A) and the CPC did not verify the assessee's records and the Orders of the Superintendent of Minerals showing that initial estimated royalty payments had resulted in excess deposits which were later adjusted when actual liability was determined. Because the allowability under section 43B turns on whether sums were actually paid on or before the due date for filing the return, the Tribunal found that the factual claim of prior excess payment and subsequent adjustment required examination. The Tribunal therefore set aside the appellate finding sustaining the disallowance and directed that the AO examine and verify the relevant documentary record (including state assessment orders and bank/payment records) and afford the assessee an opportunity of hearing before passing a fresh decision. [Paras 7, 8] Final Conclusion: The Tribunal remanded the issue to the AO for factual verification of the assessee's claim of prior excess royalty payments and subsequent adjustments, directing fresh adjudication after providing the assessee an opportunity of hearing; the appeal is allowed for statistical purposes. Issues: Whether amounts adjusted against excess royalty previously paid to the State (shown as negative liability on final determination) qualify as 'actual payment' for the purpose of claiming deduction under section 43B of the Income-tax Act, 1961.Analysis: The authorities below accepted that certain sums were paid through banking channels while treating remaining amounts as mere book adjustments against receivables arising from prior excess royalty payments. The appellate record before the Tribunal included orders of the State Mineral Superintendent showing final determination of liability and instances of negative balances reflecting excess pre-payments. The lower authorities and CPC did not verify whether the initial estimated payments, held by the State, effectively amounted to payments extinguishing liability once final determinations were made. In view of the foregoing factual materials and absence of adequate verification by the Assessing Officer and CIT(A), the issue of whether the adjustments represent actual payments cannot be conclusively resolved on the present record and requires fresh examination and opportunity of hearing.Conclusion: The matter is remitted to the Assessing Officer for detailed verification of records and factual determination whether the adjustments represent actual payments qualifying under section 43B of the Income-tax Act, 1961; appeal is allowed for statistical purposes and in favour of the assessee.