The Commissioner Of Income Tax / v. Bharat Bamboo & Timber Suppliers /Opposite-Party.

Factual and Procedural Background

The Tribunal, at the instance of the Revenue under section 256(1) of the Income Tax Act, 1961, referred a question regarding the allowance of relief for Sales Tax paid after the close of the accounting period but before the due date of filing the income tax return under section 139(1). The question arose in the context of Explanation 2 to section 43B, as inserted by the Finance Act, 1989, which has retrospective effect from 1.4.1984. The Tribunal had directed the Assessing Officer to allow such relief, and the legality of this direction was under challenge.

Legal Issues Presented

1. Whether, in view of Explanation 2 to section 43B of the Income Tax Act, 1961 (retrospectively effective from 1.4.1984), the Tribunal erred in law by directing the Assessing Officer to allow relief for Sales Tax paid after the close of the accounting period but before the due date of filing the return under section 139(1) of the Income Tax Act, 1961.

Arguments of the Parties

Assessee's Arguments

• The question has been answered in favour of the assessee by various High Courts, including Andhra Pradesh, Patna, Kerala, Orissa, Calcutta, and Gujarat High Courts.
• These High Courts have held that relief for Sales Tax paid after the accounting period but before the due date of filing the return is allowable under Explanation 2 to section 43B.
• Specific cases cited include S. Subba Rao v. Union of India, Jamshed Pur Motor Accessories v. Union of India, CIT v. P. Janardhanan Pillai, CIT v. Pyarilal Kasam Manjid Co., CIT v. Jagannath Steel Corporation, CIT v. Chandulal Venichand, Chief Commissioner (Admn) v. Sanjay Sater Syndicate, and CIT v. Govindaraja Reddiar.

Revenue's Position

• The Delhi High Court decisions in Sanghi Motors v. Union of India and Escorts Ltd. v. Union of India were cited as authority against the assessee's position.

Table of Precedents Cited

Court's Reasoning and Analysis

The court considered the question referred by the Tribunal regarding the interpretation of Explanation 2 to section 43B of the Income Tax Act, 1961, particularly its retrospective effect from 1.4.1984. The court reviewed the divergent decisions of various High Courts on whether relief for Sales Tax paid after the accounting period but before the due date of filing the return should be allowed. The majority of High Courts had ruled in favour of the assessee, allowing such relief, while the Delhi High Court had taken the opposite view.

After hearing counsel and considering the precedents, the court aligned itself with the majority view of the High Courts favouring the assessee. It concluded that the Tribunal did not err in directing the Assessing Officer to allow the relief for the Sales Tax paid within the specified time frame.

Holding and Implications

The court answered the referred question in the affirmative, ruling in favour of the assessee and against the Revenue.

This decision affirms the allowance of relief for Sales Tax paid after the close of the accounting period but before the due date of filing the return under section 139(1), pursuant to Explanation 2 to section 43B. The ruling upholds the Tribunal's direction and resolves the conflicting High Court precedents by following the majority position. There is no order as to costs, and no new precedent beyond this decision is explicitly established.