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Deduction under Section 43B is allowable only when the amount of tax, cess etc. are due and payable:

Maruti Suzuki India Ltd. (Earlier Known As Maruti Udyog Ltd.)  V  Commissioner Of Income Tax, Delhi, Civil Appeal No.11923 Of 2018 -February 07, 2020.

CORAM: Two judge bench comprising of Justice ASHOK BHUSHAN and Justice NAVIN SINHA.

The brief fact of the case is that the appellant was engaged in the business of manufacturing of Maruti Cars and also trades in spares and components of the vehicles. This company claimed eligibility for deduction u/s 43 B of the Income Tax Act as an allowable deduction. The assessing officer disallowed the claim of deduction which was appealed before the Commissioner of Income Tax. This commission also sustained the disallowance.  An appeal was made before the ITAT which also held the same decision. Following this an appeal was filed before the High Court u/s 260A of the Income Tax Act. This court made judgment in favour of the Revenue. Aggrieved by this judgment an appeal was filed before this court.

The counsel for the appellant submitted that the amount paid by the assessee is accepted as Excise Duty under the provisions of the Central Excise Act. When the payments are made by the assessee to suppliers, they can be treated as payments of Excise Duty which is qualified for deduction u/s 43B of the Income Tax Act. Here the full amount of Excise Duty is paid to the coffers of Government and thus the object and purpose of section 43B of the Act is served.

The counsel for the respondent argued that the deductions u/s 43B is allowable only when the amount of tax, cess etc. Here the Excise Duty becomes due when the assessee removes the finished products from the factory.

After considering the rival submissions of the counsel the court observed the following. The provisions of Section 43B of the Act indicates that the deductions under this act can be allowed after the fulfillment of certain conditions.

there should be an actual payment of Excise Duty whether “by way of tax, duty, cess or fee, by whatever name”;

such payment has to be “under any law for the time being in force”;

the payment of such sum should have been made by the assessee;

irrespective   of   the   method   of accounting regularly employed by the assessee, deduction shall be allowed while computing the income tax for the previous year “in which sum is actually paid” by the assessee;

the expression “any such sum payable” refers   to   a   sum   for   which   the assessee   incurred   liability   in   the previous year even though such sum might not have been payable within that year under the relevant law.

Here the facts of the case are examined to find out whether the conditions are fulfilled. The credit of the Excise Duty is given to the appellant by virtue of Rule 57A to 57F of the Central Excise Rules, 1944.the deduction u/s 43B can be allowed only when the sum is actually paid by the assessee. Thus based on the above points this court concluded that the unutilized credit under MODVAT scheme does not qualify deductions u/s 43B of the Income Tax Act.

Also the submissions in Eicher Motors Ltd. and another v. Union of India and others(1999) 2 SCC 361 made by the appellant tribunal was accepted by the court. The judgment Collector of Central Excise, Pune and others v Dai Ichi Karkaria Ltd. and others; (1999) 7 SCC 448 was relied by the counsel for the appellants. Here this court observed that “in determining the cost of the excisable product covered by MODVAT Scheme under Section 4(1)(b) of the Act read with Rule 6 of the Valuation Rules, the Excise Duty paid on raw material covered by MODVAT Scheme is not to be included. The question which was answered in the above case was entirely different to one which has arisen in the present case.”

Also the judgments Berger Paints India Ltd. versus Commissioner of Income Tax, 2004 (266) ITR 99, and Lakhan Pal National Ltd. versus ITO (1986) 162 ITR 240 were referred  by this court.

 “The proviso to Section 43B provides that nothing contained in the Section shall apply in relation to any sum which is actually paid by assessee on or before due date applicable in his case for furnishing the return in respect of the previous year in which the liability to pay such sum was incurred.”

Thus by these observations the court held that the view of the High Court was right in answering the issues in question in favour of the Revenue and against the appellant. Thus this appeal stands dismissed.

– PRIYADHARSHINI R

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