Section 43B of the Income-tax Act, 1961 is not applicable if the amounts are not statutorily payable in the accounting year.

Ajit K. Sengupta, J.

1. IN this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1984-85, the following question of law has been referred to this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that, if the amounts were not statutorily payable in the accounting year, Section 43B of the Income-tax Act, 1961, will not be applicable in this case?"

2. SHORTLY stated, the facts are that the assessee is a resident company and the assessment year involved is 1984-85 for which the previous year ended on September 30, 1983. The Assessing Officer, in the course of assessment proceedings, found that in the balance-sheet there were outstanding liabilities as under :

(i) Central sales tax 16,060

(ii) U.P. sales tax 21,335

(iii) Provident fund 2,885

The Income-tax Officer disallowed the above liabilities under Section 43B of the Income-tax Act, 1961.

3. THE assessee challenged the above disallowance before the Commissioner of Income-tax (Appeals) but remained unsuccessful. THE Commissioner of Income-tax (Appeals) held that the provisions of Section 43B were rightly applied by the Assessing Officer.

4. THE assessee, still being aggrieved, carried the matter in appeal before the Appellate Tribunal. THE assessee, before the Tribunal, relied upon the decision of the Hon'ble Gujarat High Court in the case of Lakhanpal National Ltd. v. ITO [1986] 162 ITR 240 and also on the decision of the Andhra Pradesh High Court in the case of Srikakollu Subba Rao and Co. v. Union of India [1988] 173 ITR 708. It was contended that the amounts shown as outstanding in the balance-sheet were not statutorily payable in the accounting year and, therefore, Section 43B was not applicable. The Appellate Tribunal, after considering the submissions of the parties, remitted the matter to the Income-tax Officer with the following observations :

"In view of the decision of the Supreme Court in the case of Vegetable Products Ltd, [1973] 88 ITR 192, we have to adopt the interpretation which is favourable to the assessee. We are inclined to follow the decision of the Andhra Pradesh High Court in the case of Srikakollu Subba Rao [1988] 173 ITR 708 which has also been followed by the Special Bench of the Tribunal in the case of Sri Venugopala Rice and Oil Mill (supra). For application of the ratio laid down by the Andhra Pradesh High Court in the said case, it will be necessary to ascertain whether the amount of sales tax and provident fund was or was not statutorily payable in the accounting year relevant to the assessment year under consideration. If it is found that the amount was not statutorily payable in the accounting year as has been contended before us on behalf of the assessee, in that event, the provisions of Section 43B will not apply in this case. We, therefore, direct the Income-tax Officer to ascertain whether the amount of sales tax and provident fund was not statutorily payable in the accounting year. If the assessee's contention in this regard is found to be correct, in that event, Section 43B shall not apply and the assessee will be entitled to deduction in respect of the liability relating to sales tax and provident fund."

5. A similar question came up for consideration in Income-tax Reference No. 104 of 1989 in the case of CIT v. Sri Jagannath Steel Corporation, where the judgment was delivered on December 20, 1990. That judgment was concerned only with sales tax. It was held that, if for the sales tax for the fourth quarter where the tax is payable quarterly, the date of making the payment under the relevant Act falls beyond the accounting year of the assessee and the assessee actually makes the payment of such liability of the quarter which ended with the previous year in question within the time prescribed by the statute, in such a case although the payment has been made subsequently, it must relate back to the year for which the deduction has been cla