TaxTMI 
TaxTMI 
2013 (4) TMI 286
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....irecting the A.O. to work out the disallowance u/s 43B, on account of outstanding luxury tax liability, on the basis of actual realisation of the luxury tax and not on the basis of unrealised luxury tax although the assessee was maintaining its accounts under mercantile system." 2. The facts giving-rise to this reference are that M/S U.P. Hotels Pvt. Limited, 10/252, Maqbool Alam Road, Varanasi (the respondent) is a public limited company, and engaged in the hotel business. The respondent owned (i) Hotel Clarks Shiraz, Agra, (ii) Hotel Clarks Avadh, Lucknow and (iii) Hotel Clarks Amer, Jaipur. In the present reference, the question relates to addition of the amount of "luxury tax" payable by the respondent for the Assessment Years 1987-88 ....
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....08.1990 found that total payment of luxury tax during the year exceeded total collection of the luxury tax. The amount which was not collected cannot be treated as income of the respondent and no addition can be made in this head. On these findings the appeal was allowed in part and the addition made in this head was deleted. 4. The respondent filed its income tax return for the Assessment Year 1988-89 on 28.06.1988 showing income of Rs. 17,30,187/- This income was adjusted against unabsorbed carried forward loss and depreciation. The Assessing Officer on scrutiny of balance sheet, noticed that luxury tax of Rs. 6,85,057/- was payable on the total gross income at the rate 7%. Similarly credit balance of Rs.1,95,295/- was payable by Lucknow....
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....ard by the Tribunal, who by order dated 22.09.1998 dismissed the appeals of the Revenue in respect of luxury tax. Later on at the instance of the CIT Kanpur, this reference was made. 6. Heard Sri R. K. Upadhyay, Senior Standing Counsel for the Revenue and Ashish Kumar Bansal for the respondent. Sri Upadhyay submitted that Section 43B of the Act provides that deduction shall be allowed only on actual payment of any sum payable by way of tax. Luxury tax is payable by the respondent under Section 4 of U.P. Taxation and Land Revenue laws Act, 1975 read with Rule-3 of U.P. Luxuries (In Hotel) Tax Rules, 1975. As the respondent has not made actual payment in this head as such the amount of luxury tax which was payable by the respondent was liabl....
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....rovides that income referred to in Section 28 shall be computed in accordance with the provisions contained in Sections 30 to 43D. Section 43B provides a right to the assessee to claim deduction of any sum payable by the assessee by way of tax, duty, cess or fee etc. This Section imposed a condition that such deduction be allowed only in case of actual payment of the liabilities mentioned therein by the assessee . Section 43B of the Act is concerned with deduction claimed by the assessee. Thus the scope of inquiry by the Assessing Officer under Section 43B of the Act is as to whether the assessee can be allowed deduction which can only be allowed to the assessee when it has liability to pay under the law and has actually paid that amount. T....