COMMISSIONER OF INCOME-TAX VS RAGHAVJI VERRJI
1999 P T D 1482
[226 I T R 465)
[Madhya Pradesh High Court (India))
Before A. K. Mathur, CJ, D. M. Dharmadhikari and Dipaak Misra, JJ
COMMISSIONER OF INCOME-TAX
Versus
RAGHAVJI VERRJI and others
Miscellaneous Civil Cases Nos.653 of 1993, 72, 235, 49 and Income-tax References Nos.62 and 79 of 1994 and 2 of 1996, decided on 24/04/1997.
Income-tax---
----Business expenditure---Deduction only on actual payment---Amounts not actually paid---Exclusion from disallowance---Law applicable---First proviso to S.43-B has retrospective effect---Indian Income Tax Act, 1961, S.43-B-- [CIT v. Sumermal Gopichand (1997) 226 ITR 456 (MP) overruled].
Section 43-B(a) of the Income Tax Act, 1961, the first proviso to section 43-B and Explanation 2 have to be read together as giving effect to the true intention of section 43-B. Explanation 2 being retrospective, the first proviso has also to be so construed. Without the first proviso, Explanation 2 would not obviate the hardship or the unintended consequences of section 43-B. The proviso supplies an obvious omission. But for this proviso, the ambit of section 43-B becomes unduly wide bringing within its scope those payments which were not intended to be prohibited from the category of permissible deductions. The first proviso to section 43-B, therefore, has to be treated as retrospective.
Allied Motors (P.) Ltd. v. CIT (1997) 224 ITR 677 (SC) fol.
CIT v. Shree Tea Co. (1997) 226 ITR 445 (MP) and CIT v. Satpal Vijay Kumar (1997) 226 ITR 449 (MP) approved.
CIT v. Sumermal Gopichand (1997) 226 ITR 456 (MP) overruled.
V.K. Tankha for the Commissioner.
B.L. Nema for the Assessee
JUDGMENT
A.K. MATHUR C.J.---All these seven similar matters have been referred to the Full Bench of this Court on account of conflicting decisions of the main seat at Jabalpur and of the Indore Bench in the cases of CIT v. Sumermal Gopichand (1997) 226 ITR 456 (M.C.C. No.564 of 1991, decided on 15-4-1996), (by main seat at Jabalpur) and CIT v. Shree Tea Co. (1997) 226 ITR 445 and CIT v. Satpal Vijay Kumar (1997) 226 ITR 449 (decided by the Indore Bench).
It has been brought to our notice that recently the Supreme Court has resolved the controversy in the case of Allied Motors (P.) Ltd. v. CIT (1997) 224 ITR 677. It has been held as under (headnote):
"Section 43-B(a), the first proviso to section 43-B and Explanation 2 have to be read together as giving effect to the true intention of section 43-B. Explanation 2, being retrospective, the first proviso has also to be so construed. Without the first proviso, Explanation 2 would not obviate the hardship or the unintended consequences of section 43-B. The proviso supplies an obvious omission. But for this proviso the ambit of section 43-B becomes unduly wide bringing within its scope those payments which were not intended to be prohibited from the category of permissible deductions. The first proviso to section 43-B, therefore, has to be treated as retrospective. "
Since their Lordships of the Supreme Court have already taken the view that the first proviso to section 43-B is retrospective in effect, all the seven references are answered in favour of the assessee and against the Revenue. These cases may be treated to have been disposed of and need not be sent to the Division Bench.
M.B.A./1995/FCOrder accordingly