ORDER
G.R. Raghavan, Accountant Member
1. This appeal of the revenue arises out of the order of the Commissioner (Appeals) in IT Appeal No. 24 (MDU) of 1982-83, dated 16-3-1983. Two contentions have been raised by the revenue in this appeal. The first one relates to the direction contained in para 2 of the order of the Commissioner (Appeals) allowing the entire claim on account of entertainment expenditure. The second contention relates to the direction contained in para 5 of the order of the Commissioner (Appeals) that the advance tax liability in the sum of Rs. 1,68,089 should not be deducted as a debt owed by the assessee as on the first day of the computation period while ascertaining the capital employed in an industrial undertaking under the provisions of Section 80J(1A)(iii) of the Income-tax Act, 1961 (‘the Act’).
2 to 4. [These paras are not reproduced here as they involve minor issues.)
5. The following are the facts relating to the next contention:
While computing the capital employed in the new industrial undertaking known as Visa Match Industries, the IAC (Assessment), deducted from the aggregate value of the assets, as ascertained under Clause (II) of Section 80.T(1A), a sum of Rs. 1,68,089 being the advance tax payable by the assessee-company in three instalments on 15-6-1979, 15-9-1979 and 15-12-1979 as a debt owed by the assessee under Clause (III) of Section 80J(1A). On appeal, the Commissioner (Appeals) held, that the first day of the computation period being on 1-7-1979 (first day of the accounting year), the instalment of advance tax due on 15-6-1979 would have already been paid and the remaining two instalments would have not become due as on that date and, therefore, the sum of Rs. 1,68,089 representing these instalments would not constitute a liability or a debt as on the first day of the computation period. Aggrieved with this decision, the department is in appeal before us.
6. It was contended before us on behalf of the revenue, that the liability to pay advance tax was a present liability though payable in instalments and, therefore, constituted a debt or liability as on the first day of the computation period for ascertaining the capital and, therefore, deductible under Section 80J(1A)(III). In this connection, our attention was invited to Assam Oil Co. Ltd. v. CWT [1966] 60 ITR 267 (SC) as also Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC). In Assam Oil Co. Ltd.’s case (supra) the Supreme Court held, following Kesoram Industries & Cotton Mills Ltd.’s case (supra), that, while computing net wealth of an assessee on 31-12-1956, being the relevant valuation date, the final instalment of advance tax under Section 18A of the Indian Income-tax Act, 1922 (‘the 1922 Act’), payable on 15-3-1957, was deductible as it was a debt owed by the assessee on the valuation date within the meaning of Section 2(m) of the Wealth-tax Act, 1957 (‘the 1957 Act’). Our attention was also invited to Clause (III) of Section 80J(1A) which provides for deduction of debts inclusive of liability in respect of tax while computing the capital as on the first day of the computation period for the purposes of Section 80J relief. The learned authorised representative for the department, particularly, drew our attention to Sub-clause (i)(a) of Clause (III) of this section which specifically defines tax to mean income-tax or super-tax inclusive of advance tax due under any provisions of this Act. We were also required to note Sub-clause (ii)(a) of Clause (III) of this section wherein a liability in respect of tax shall be deemed to have become due in the case advance tax due on the date on which such advance tax is payable. The revenue’s contention was that the liability to pay advance tax had accrued on the first day of the computation period, though the assessee was permitted to pay the same in instalments on 15-9-1979 and 15-12-1979 under Section 211 of the Act. In this view of the matter, it was contended on behalf of the revenue that the entire advance tax due was a debt or liability on the first day of the computation period and, therefore, it was deductible from the aggregate value of the assets as computed under Clause (II) of Section 80J(1A).
7. On behalf of the assessee, our attention was invited, particularly, to Sub-clause (ii)(a) of Clause (III) of Section 80J(1A) wherein liability to pay advance tax shall be deemed to have become due on the date on which such advance tax is payable. It was, therefore, contended that since the due dates for payment of advance tax were beyond the computation period, the liability in respect thereof should not be deducted in computing the capital.
8. We have carefully considered the arguments and referred to the statutory provisions in this behalf as also the authorities cited. Though Sub-clause (ii)(a) of Clause (III) of Section 80J(1A) lays down that any liability in respect of tax shall be deemed to have become due in the case of advance tax due under any provisions of this Act, on the date on which such advance tax is payable [emphasis supplied.] And following this, the two instalments of advance tax (15-9-1979 and 15-12-1979) fall after the first day of the computation period (1-7-1969) and, therefore, shall be deemed to have become due only on those dates, we are bound to follow the decision of the Hon’ble Supreme Court in Assam. Oil Co. Ltd.’s case (supra), though decided in the context of the 1957 Act, as it lays down the law of the land in relation to determination of the exact date of the liability in relation to advance tax. in that case, the Hon’ble Supreme Court, as already mentioned by us earlier, held, that while computing the net wealth of the appellant-company as on 31-12-1956, being the relevant valuation date, the final instalment of advance tax under Section 18A of the 1922 Act payable on 15-3-1957 (very much later) was deductible as it was a debt owed by the appellant-company on the valuation date within the meaning of Section 2(m) of the 1957 Act. There also the question that arose for consideration was whether an advance tax instalment payable after the valuation date would constitute a deductible debt under Section 2(m) as on the valuation date. In this context, the Hon’ble Supreme Court held, that, the advance tax instalment due after the valuation date also would constitute a debt on the valuation date. They relied on their own decision in Kesoram Industries & Cotton Mills Ltd.’s case (supra). As the question involved in this case is absolutely identical, though under the Act, we are bound to follow the decision of the Supreme Court in this regard despite the definition given in Section 80J(1A)(III)(ii)(a). We, therefore, respectfully following the Supreme Court’s decision, hold that the Commissioner (Appeals) was not justified in directing the ITO not to deduct the liability on account of advance tax while computing the capital for Section 80J purposes. We, accordingly, allow this ground of the department.
9. In the result, the appeal filed by the department is allowed.
