(a) Income-tax---

----Business expenditure---Deduction to be allowed only on actual payment-- Scope of S.43B---Assessee following mercantile system---Assessee claiming deduction of actual payment of purchase tax---Tribunal holding that deduction not allowable unless provision was made in year in which liability for tax or duty accrued---Not justified---Indian Income Tax Act, 1961, S.43B.

There is no part of section 43B or the Income Tax Act itself which requires that when deduction is claimed on the basis of section 43B the assessee must satisfy the twin test of both proving actual payment of the due tax or cess in the previous year in question as well as satisfying the Department that due provision had been made in the books in regard to such duty or tax for which payment was made later on. To introduce this double test would be writing words into the section which neither the Tribunal nor the Court is entitled to do.

The Tribunal cannot remand that part of the order which had come before it unchallenged:

Held accordingly, that the Tribunal was not correct in directing consideration afresh of the entire payment -of- Rs.T30,284 as, out of this, Rs.1,23,695 had already been allowed as deduction nor was the Tribunal correct in law in holding that where the mercantile system is followed deduction of tax under section 43B is impermissible unless the provision was made in the year in which the liability for tax accrued or arose.

(b) Income-tax---

----Appeal to Appellate Tribunal---Powers of Tribunal---No appeal on a particular issue---Tribunal has no power to remand matter with regard to such issue---Indian Income Tax Act, 1961.

R.N. Bajoria, J. P. Khaitan and Sanjay Banerjee for the Assessee.

A.C. Moitra for the Commissioner.

JUDGMENT

Although this is a matter at the final stage of answer to the questions; and although we have heard learned advocates appearing both for the assessee and for the Department on more days than one, and although authorities were cited on both sides, yet, in our opinion, the matter is of such utter simplicity that it can be disposed of in a very brief compass.

The questions relate to admissibility of deductions of two several sums of Rs.1,23,695 and Rs.2,06,589 pa-id by the assessee on account of purchase tax during the assessment year in question but those sums being relatable to an earlier accounting and assessment year.

The claim was made on the basis of actual payment because of the changes introduced in and by section 43B of the Income-tax Act. That section need not to be set out in full as that is easily available. The important point is Explanation 1 contained in the further proviso which states that, for the removal of doubts, it is clarified, that in computing the income of the. previous year, being a previous year relevant to the assessment year commencing on April 1, 1983, or any earlier assessment year, in which the liability to pay tax or duty was incurred by the assessee, the assessee shall not be entitled to any deduction in respect of the sum in computing the income of the previous year in which the sum is actually paid by him.

It is also provided in the section, prior to the provisos, that for later years, the deduction shall be allowed in computing the income only in the previous year in which the sum representing tax, duty, cess or fee is actually paid by the assessee.

In regard to the sum of Rs.1,23,695 the assessee has been successful front the beginning.' In regard to the second sum of Rs.2,06,589, the assessee was successful only before the Appellate Commissioner.

So far as the sum of Rs. l lakh and odd is concerned the Department did not raise the matter in regard to this sum.

When the Department went before the Tribunal, the Tribunal, not a little surprisingly, passed an order of remand with regard to the entirety of the sum of Rs.3,30,284. This was strange as the allowed amount of Rs.1,23,695 did not form a matter of dispute before the Tribunal at alt

In so far as the sum of Rs.2,06,589 was concerned, the Tribunal was not pleased to uphold the allowance of deduction on the ground that in the relevant accounting year provisions had apparently not been made by the assessee in regard to the payment of this purchase tax.

Therefore, the entire matter was sought to be remanded for examination as to how the matters had been dealt with by the assessee, in the relevant books, irrespective of the fact that the assessee had paid the total sum of Rs.3,30,284 in the assessment year in question in which deduction was claimed in regard thereto on the basis of the then introduced section 43B.

Very simply put, our opinion is that there is no part of this section or the Income-tax Act itself which requires that when deduction is claimed on the basis of section 43B, the assessee must satisfy the twin test of both proving actual payment of the due 'tax or cess in the previous year in question as well as satisfying the Department that due provision had been made in the books in regard to such duty or tax for payment was made later on.

To introduce- this double test would be writing words into the section which neither the Tribunal nor the Court is entitled to do In other parts of the Act, where provision in the books if given a special status, and that is specifically called for but section 43B is not one such section.

The Tribunal, therefore, went wrong in law in seeking to open up an enquiry as to the way provision had been made in the books of the assessee in regard to this total sum of Rs.3,30,284. They also made an error of law in seeking to remand that part of the order which had come before them, if we might use the expression, unchallenged after appeal.

Accordingly, both the questions are answered in favour of the assessee. The Tribunal was not correct in directing consideration afresh of the entire payment of Rs.3,30,284 nor was the Tribunal correct in law in holding that where mercantile system is followed deduction of tax under section 43B is impermissible less provision was made in the year in which the liability for tax accrued or arose.

We put it on record only for the purpose of completeness, that the matter was once heard before the reference Bench and it is the contention of the assessee that when judgment was delivered in open Court the indications were that both the questions had been answered in the negative and, therefore, in favour of the assessee, but when the written judgment actually became available it had appeared that one of the questions had been answered against the assessee. But as that earlier judgment has been recalled we pass the order afresh, this time holding in favour of the assessee on both the issues.

All parties and all others concerned to act on signed xerox, copy of this dictated order on the usual undertakings.

M.B.A./4025/FC Order accordingly.