ORDER
D.S. Meenakshisundaram, Judicial Member
1. Since the contentions raised by the assessees in this batch of five appeals are identical, they are disposed of by a common order for the sake of convenience.
2. These appeals raise the question of the applicability of Section 43B of the Income-tax Act, 1961 to the amounts claimed by these assessees as deductions in the computation of their business income for the assessment year 1984-85. We set out below the nature of the tax and the amounts of tax claimed by these five assessees in their assessments :
________________________________________________________________
IT A No. Appellant's Nature Amount Asst. Previous
name of Rs. Year year
tax ended
________________________________________________________________
1. 930/85 M.V. Tex- Entry 11,231 1984-85 4-11-83
tiles Tax
2. 931/85 Himmatmal -do- 20,000 , ,
Swaroopc-
hand
& Co.
3. 932/85 Singhvi -do- 19,410 , ,
Mithalal
Madanraj
& Co.
4. 933/85 Mishrimal -do- 13,411 , ,
Vasraj
& Co.
5. 934/85 Yemkay Turnover 60,360 , 31-12-83
Distrib- Tax
Utors
It would toe noticed that in respect of the first four assessees the dispute is in respect of entry tax while in respect of the last assesseee it is in respect of turnover tax. The departmental authorities had rejected the claim of the assessees by relying on the provisions of Section 43B of the Act which had come into force with effect from 1-4-1984 in the statute book. Since the assessees had not paid these amounts during the previous year but had only made a provision for them in their accounts.
3. Before us, Shri Nagin Kincha, the learned Chartered Accountant for the assessees contended that the provisions of Section 43B of the Act relied on by the departmental authorities was inapplicable to these amounts claimed by these assessees. According to the learned Chartered Accountant these amounts were not payable but were only due and that, therefore, the provisions of Section 43B could not be invoked by the departmental authorities. In support of his submissions the learned counsel relied on the order of the Supreme Court dated 30-1-1984 permitting the assessees to pay the tax within one year in four equal instalments at the end of each quarter commencing from 1-1-1984. He further relied on the decision of this Bench in the case of Fourth ITO v. Sanjay Sales Syndicate [IT Appeal No. 1484 (Bang.) of 1985, dated 25-8-1986] and submitted that in view of this decision of the Tribunal he was entitled to succeed in all these appeals. The assessees’ learned Chartered Accountant sought to derive support from the language of Section 2(m) of the Wealth-tax Act where the words used are “debts owed by the assessee on the valuation date” which had been interpreted to mean as “debts due and outstanding even though not payable by the assessee as on the valuation date”.
4. On behalf of the revenue, reliance was placed by Shri B. Ravibalan, the learned departmental representative, on the language of Section 43B of the Act itself to contend that these amounts were payable by these assessees during the previous year and that there was really no difference between the amount being due and an amount being payable but that both the words denote the same idea. He further argued that the decision of this Bench relied on by the learned Chartered Accountant for the assessees would be of no avail as it related to the allowability of an amount of sales-tax collected by the assessee which he paid on monthly return basis on or before 25th of the succeeding month for which the Finance Act, 1987 has made a provision by inserting a proviso to relieve the hardship which was unintended in such cases. Shri Ravibalan relied on the decision of the Allahabad Bench of the Appellate Tribunal in the case of New Cawnpore Flour Mills (P.) Ltd. v. ITO [1986] 19 ITD 360. He particularly invited our attention to paragraphs 14 and 15 where this point is discussed by the Appellate Tribunal and pointed out that the Appellate Tribunal in that case had relied on the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 to uphold the contention of the Department for applying Section 43B of the Act in the said case. The learned departmental representative submitted that it is this decision of the Allahabad Bench which is apposite to the facts of the present case and that the same should be followed in the case of these assessees.
5. The learned Chartered Accountant in his reply relied on the decision of the Kerala High Court in the case of L.J. Patel and Co. v. CIT [1974] 97 ITR 152 wherein it has been held that where the liability of the assessee, who was maintaining the mercantile system of accounting, to pay exise duty arose in 1952, but as he was contesting the liability, the amount was paid only in 1962, the deduction of the amount paid could have been claimed only in 1952 in accordance with Section 13 of the Indian Income-tax Act, 1922 and Section 145(1) of the Income-tax Act, 1961 and that the assessee could not claim the deduction in the assessment year 1963-64. The learned counsel pointed out that in this case, the Kerala High Court had followed the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. (supra).
6. We have carefully considered the rival submissions of the parties in light of the authorities relied on by them. Section 43B of the Income-tax Act which was inserted by the Finance Act, 1983 with effect from 1-4-1984 reads as follows :
43B. Certain deductions to be only on actual payment.-Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-
(a) any sum payable by the assessee by way of tax or duty under any law for the time being in force, or
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees,
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him.
Explanation : For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in Clause (a) or Clause (b) of this Section is allowed in computing the income referred to in Section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this Section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.
7. It is the argument of the assessees’ learned counsel that the amounts of entry tax and turnover tax set out in para 2 were no doubt due from the assessees but were not payable by them and that therefore, the departmental authorities cannot invoke Section 43B of the Act to disallow the claim of the assessees for deduction of these amounts under Section 37(1) of the Act on the mercantile system of accounting which is being followed by these assassees. In our view, normally, if the provisions of Section 43B of the Act were not there, the assessees would be entitled to this deduction under Section 37(1) as claimed by them on the basis of their method of accounting viz. the mercantile system of accounting. But after the introduction of Section 43B of the Act, such deductions are not allowable in view of the express provision against such allowances unless the amounts of tax or duty which are payable by the assessees under any law for the time being in force, is actually paid, by the assessees during the previous year even though the assessees might have incurred the liability to pay such tax or duty during1 the previous year. Section 43B is a special provision as could be seen from the opening words of the Section which overrides the provisions of Section 37 of the Act as it starts with non obstante clause. We are unable to agree with the learned counsel when he draws a distinction between the tax due and the tax payable by the assessees. There is no dispute in the case of the present assessees that they had actually incurred the liability to pay these amounts of entry tax or turnover tax, as the case may be, during the previous year. There is also no dispute that the assessees had not actually paid these amounts of tax to the Karnataka Government during the previous year. The order of the Supreme Court dated 30-1-1984 in Civil Miscellaneous Petition Nos. 39197 to 39203 of 1983 insofar as they are relevant for our purpose reads as follows :
1. THAT there will be no stay of recovery of entry tax if the same is assessed hereafter but the petitioners/appellants herein will have to pay the same.
2. THAT as regards arrears of which assessments have been made such arrears will be paid within one year in four equal instalments at the end of each quarter commencing from 1-1-1984.
3. THAT as regards the arrears of which assessments have not yet been made such arrears will be paid within one year in four equal instalments at the end of each quarter commencing after the petitioners/appellants herein file their returns which they under take to file within three weeks from this the 30th day of January, 1984 and assessments are made.
From a perusal of the aforesaid order of the Supreme Court, it would be noticed that there was no stay of recovery of entry tax or turnover tax granted by the Supreme Court to the assessees as can be seen from para 1 quoted above. However, their Lordships have extended the time of payment by one year to enable the petitioners to pay arrears of tax in four equal quarterly instalments at the end of each quarter commencing from 1-1-1984. In fact, this order of the Supreme Court shows that these amounts of entry tax and turnover tax had become payable by the assesses during the previous year and it was for that reason the assessees had moved the Karnataka High Court and the Supreme Court for stay of recovery of these amounts from them. If the amounts were not actually payable by the assessees during the previous year, there was absolutely no need for the assessees to have moved either the High Court or the Supreme Court for the stay of recovery of these amounts from them. We are, therefore, unable to agree with the learned counsel for the assessees that these amounts of tax were not payable by the assessees during the previous year so as to get out of the mischief of Section 43B of the Act.
8. Further the argument of the learned counsel for the assessees lays emphasis only on the following three words appearing in Section 43B(a) of the Act, viz. “any sum payable” ignoring the rest of the provision of law. The learned counsel placed considerable stress on the word “payable” to contend that unless the amount of tax was payable during the previous year it will not be hit by Section 43B. This argument of the learned counsel apparently overlooks that the word “payable” is used as an adjective, to describe the quality or the nature of the sum to which this provision of law applies. Further the word “payable” also means “due” as could be seen from Chambers’ Twentieth Century Dictionary, (Revised edition). Therefore, the distinction sought to be drawn by the learned counsel is one without a difference.
9. In the case of CIT v. Shahzada Nand & Sons [1966] 60 ITR 392, the Supreme Court held at pages 400 & 401 as follows :
Before we advert to the said arguments, it will be convenient to notice the relevant rules of construction. The classic statement of Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners still holds the field. It reads :
‘… In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity, about a tax. There is no presumption as to a tax. Nothing is read in, nothing is to be implied. One can only look fairly at the language used.’
To this may be added a rider : in a case of reasonable doubt, the construction most beneficial to the subject is to be adopted. But even so, the fundamental rule of construction is the same for all statutes, whether fiscal or otherwise. “The underlying principle is that the meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the court as to what is just or expedient.” The expressed intention must guide the court. Another rule of construction which is relevant to the present enquiry is expressed in the maxim, generalia specialibus non derogant, which means that when there is a conflict between a general and a special provision, the latter shall prevail. The said principle has been stated in Craies on Statute Law, 5th edition, at page 205, thus :
The rule is, that whenever there is a particular enactment and a general enactment in the same statute and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply.
But this rule of construction is not of universal application. It is subject to the condition that there is nothing in the general provision, expressed or implied, indicating an intention to the contrary : see Maxwell on the Interpretation of Statutes, 11th edition, at pages 168-169. When the words of a Section are clear, but its scope is sought to be curtailed by construction, the approach suggested by Lord Coke in Heydon’s case yield better results :
To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of the whole Act; to consider, according to Lord Coke : 1. What was the law before the Act was passed; 2. What was the mischief or defect for which the law had not been provided; 3. What remedy Parliament has appointed; and 4. The reason of the remedy.
When we apply the aforesaid rules of construction as laid down by the Supreme Court to the facts and Section 43B of the Act, it would be clear that the amounts of entry tax and turnover tax are payable by these assessees during the previous year under the relevant provisions of law to the Karnataka State Government. But that they have not been actually paid by the assessees during the previous year. Therefore, these amounts would squarely fall within the mischief of Section 43B of the Act. They are, therefore, rightly disallowed by the departmental authorities.
10. The decision of the Allahabad Bench of the Tribunal in the case of New Cawnpore Flour Mills (P.) Ltd. (supra), fully supports this conclusion of ours. In fact, in para 15, at page 368 of the reports, the Appellate Tribunal has followed the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. (supra). In this decision of the Kedarnath Jute Mfg. Co. Ltd.’s case (supra), the Supreme Court held that the moment a dealer made either purchases or sales which were subject to sales-tax, the obligation to pay tax arose, that although that liability could not be enforced till the quantification was effected by assessment proceedings, the liability for payment of tax was independent of the assessment and that the assessee which followed the mercantile system of accounting was entitled to deduct from the profits and gains of its business, liability to sales-tax which arose on sales made by-it during the relevant previous year. Their Lordships further pointed out that the assessee in the said case was entitled to the deduction of the sum of Rs. 1,49,776 being the amount of sales-tax which it was liable under the law to pay during the accounting year and that the said liability did not cease to be a liability because the assessee had taken proceedings before higher authorities for getting it reduced or wiped out so long as the contention of the assessee did not prevail. When we examine the provisions of Section 43B of the Act in the light of the aforesaid principles also as laid down by the Supreme Court, it would be clear that the amounts of tax or duty for which the liability to pay on the part of the assessee but which had not been actually paid by him during the previous year, would fall within the mischief of Section 43B of the Act.
11. The decision of this Bench in the case of Sanjay Sales Syndicate (supra) relied on by the assessee’s counsel is not applicable to the facts of the present case. The dispute in the said case was in relation to the allowability of sales-tax and surcharge collected by the assessee and payable under the monthly return scheme in respect of the last month of the year for which the return was due to be filed by the assessee on or before 25th of the succeeding month. We are not concerned with sucn a case in the case of the present assessees. In fact, as rightly pointed out on behalf of the revenue, this unintended hardship which arose in the case of Sanjay Sales Syndicate (supra) has been relieved by the introduction of the first proviso to Section 43B inserted by the Finance Act, 1987 from 1-4-1988. The reference to Section 2(m) of the Wealth-tax Act, 1957, is of no relevance or assistance in the present case.
12. The next decision in the case of L.J. Patel & Co. (supra) relied on by the assessee’s counsel also is of no assistance to the present case as the said decision was not concerned with the interpretation of Section 43B of the Act. We, therefore, agree with the learned departmental representative that these decisions relied on by the learned counsel for the assessees are inapplicable to the facts of the present case. We may further point out that the acceptance of the assessee’s contentions would really defeat the purpose and object of the introduction of Section 43B in the Act and reduce it to a dead letter. It is a well accepted principle of construction that any provision of law should be construed in a harmonious fashion so as to make it workable and not to defeat the very purpose of enacting it.
13. For the reasons discussed above, we find ourselves unable to agree with the contentions of the learned counsel urged on behalf of the assessees. We, therefore, confirm the orders of the authorities below and dismiss the appeals.