JUDGMENT
R.K. Abichandani, J.
1. The Tribunal, Ahmedabad, has referred the following question for the opinion of this Court under s. 256(1) of the IT Act, 1961.
“Whether the Tribunal is right in law and facts in holding that if the unpaid sales tax liability is paid before the due date for filing of the return under s. 139(1), no addition could be made invoking the provisions of s. 43B of the IT Act ?”
2. The matter relates to the asst. yr. 1985-86. While making the income-tax assessment of the assessee-company, the AO noted that there was unpaid sales-tax liability of Rs. 30,123 under the Gujarat ST Act and of Rs. 39,052 under the Central ST Act, aggregating to Rs. 69,175 at the end of the accounting period, and, invoking the provisions of s. 43B of the said Act, disallowed the said amount. The CIT(A) confirmed that order. The Tribunal in the appeal by the assessee following its earlier decision in the case of Chandulal Venichand & Ors. vs. ITO [reported at (1991) 40 TTJ (Ahd) 358], held that no addition could be made for the said sum of Rs. 69,175. The case of Chandulal Venichand was carried to the High Court at the instance of the Revenue and this Court in CIT vs. Chandulal Venichand & Ors. (1994) 209 ITR 7 (Guj) : TC 19R.748, while construing the provisions of s. 43B of the said Act held that, the purpose underlying s. 43B was to curb the practice of some taxpayers of not discharging their statutory liability such as in respect of excise duty, sales-tax, employer’s contribution to provident fund and Employees State Insurance Scheme for a long period of time and yet at the same time to take deduction for such amount while resorting to the mercantile method of accounting. It was held that the legislature has never intended that taxpayers who discharge their statutory liabilities within the prescribed time should be placed in a disadvantageous position. It was held that the first proviso which was inserted w.e.f. 1st April, 1988 in s. 43B was added to mitigate hardship caused to the taxpayers because the sales-tax for the last quarter cannot be paid during the previous year and under the provisions of s. 43B, the payment of sales-tax for the last quarter was getting unnecessarily disallowed. The Expln. 2 which was inserted in s. 43B with retrospective effect from 1st April, 1984 and the first proviso were required to be read harmoniously with s. 43B and construed so as to advance the remedy intended by the statute. It was noted that the proviso was introduced to remove the hardship caused to certain taxpayers who had represented that since sales-tax for the last quarter cannot be paid within that previous year, the original provisions of s. 43B will unnecessarily involve disallowance of the payment for the last quarter. It was noted that Expln. 2 was added as certain Courts had interpreted the provisions of s. 43B in a manner which may negate the very operation of the section. It was held that by its very nature, the proviso was in a declaratory form. The Court observed that it would be unreasonable to say that the sales-tax payment for the last quarter should be made within the previous year. It was further observed that if Expln. 2 and clause (a) of s. 43B are read together, it would mean that the deduction shall be allowed in computing income only in the year in which such sum is actually paid in respect of any sum payable by way of tax for which the assessee incurred liability in the previous year, even though such sum might not have been payable within that year, for example, under the ST law. If the first proviso was not there, it was bound to cause untold hardship to the assessee, because practically it would be impossible for him to discharge sales-tax liability of the last quarter in the previous year in which the liability was incurred. To obviate this hardship, as a remedial and curative measure, the first proviso is added. It was in terms held that even if it was not specifically provided that the proviso would come into operation from 1st April, 1984, yet it was required to be held that the said proviso was a part and parcel of s. 43B from the very beginning. The Division Bench, therefore, held that the first proviso to s. 43B was retrospective in its operation. Expln. 2 to the said section was subject to the said proviso and the law as amended was applicable even for the asst. yr. 1984-85.
3. The provisions of s. 43B(a), the 1st proviso to s. 43B and Expln. 2 to s. 43B came to be construed by the Hon’ble Supreme Court in Allied Motors (P) Ltd. vs. CIT (1997) 224 ITR 677 (SC) and the Supreme Court reviewing the case law on the point in which divergent views were taken concurred with the opinion of this Court in the case of Chandulal Venichand (supra) and held that the first proviso was added in s. 43B to obviate the unexpected outcome of s. 43B whereby the assessee who had collected sales-tax in the last quarter of the accounting year and deposited it in the treasury within the statutory period falling in the next accounting year, was not entitled to claim any deduction for it. It was held that this was not intended by s. 43B. The first proviso, therefore, made it clear that section will not apply in relation to any sum which was actually paid by the assessee in the next accounting year, if it is paid on or before the due date for furnishing the return of income in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment was furnished by the assessee along with the return. It was held that Expln. 2 was added with retrospective effect from 1st April, 1984, for the purpose of removing any ambiguity about the term “any sum payable” under clause (a) of s. 43B because the said expression “any sum payable” was open to the interpretation that the amount payable for a particular year should also be statutorily payable under the relevant statute in the same year. The Supreme Court held that s. 43B(a), the first proviso to s. 43B and Expln. 2 have to be read together as giving effect to the true intention of s. 43B. Expln. 2 being retrospective, the first proviso was also to be so construed. Without the first proviso, the Expln. 2 would not obviate the hardship or the unintended consequences of s. 43B. It was held that the proviso supplied an obvious omission and but for this proviso, the ambit of s. 43B would be unduly wide bringing within its scope those payments which were not intended to be prohibited from the category of permissible deductions. The first proviso to s. 43B, it was held, had to be treated as retrospective. It will be noted that even Allied Motors (P) Ltd. (supra) decided by the Supreme Court related to the asst. yr. 1984-85.
4. In view of the ratio in the decision of the Supreme Court in Allied Motors (P) Ltd. (supra), and the ratio of the decision of this Court in Chandulal Venichand’s case (supra), we are of the view that the Tribunal was right in holding that if unpaid sales-tax liability is paid before the due date for filing of the return under s. 139(1), no addition could be made invoking the provisions of s. 43B of the IT Act. The question referred to us is, therefore, answered in the affirmative against the Revenue and in favour of the assessee. The reference stands disposed of accordingly with no order as to costs.