Commissioner of Income Tax vs Central India Motors

A.K. Tiwari, J.—At the instance of the revenue, the Tribunal has stated the case and referred the undernoted question of law u/s 256(1) of the income tax Act, 1961 (''the Act'') arising out of the order dated 25-8-1993 passed by the Tribunal in IT Appeal No. 635 (Indore) of 1989 for our answer : "Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was justified in law in holding that the deduction should be allowed for the amount of the sales tax, which has been paid before the date prescribed for filing of the return u/s 139(1) of the income tax Act, 1961 ?"

Facts lie in narrow compass. The revenue authorities made a deduction of Rs. 2,37,218 by invoking the provisions of section 43B of the aforesaid Act. The said amount represents the outstanding credit balance in the sales tax account and the employees contribution to provident fund. The Tribunal had directed the Assessing Officer to examine the component of the said amount and to allow deduction of such amount of sales tax which was paid before the due date prescribed u/s 139(1) of the Act for submission of the return of income for the assessment year in question. The Tribunal held that the proviso was declaratory in nature and was, thus, retrospective in operation. Aggrieved, the revenue filed the application u/s 256(1). On this application, the Tribunal stated the case and referred the aforesaid question.

Shri Shyamlal, the ITO, appeared for the revenue. Shri Shyamlal prayed for adjournment, but we declined the request. Shri Pankaj Bagadia, Advocate, appears for the assessee. We heard them.

We notice that the Tribunal took the view that although the proviso was inserted with effect from 1-4-1988, it was declaratory in nature and as such, was applicable retrospectively. The remedial statute should receive a literal construction.

In Saroj Aggarwal v. CIT [1985] 156 ITR 497/23 Taxman 76 (SC), it is held as under :

"... Courts should, whenever possible, unless prevented by the express language of any section or compelling circumstances of any particular case, make a benevolent and justice-oriented inference. Facts must be viewed in the social milieu of a country."

In CIT v. J.H. Gotla [1985] 156 ITR 323/23 Taxman 14J, it is held by the Supreme Court as under :

"... If the purpose of a particular provision is easily discernible from the whole scheme of the Act,... then, bearing that purpose in mind, we should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempt should be made that there do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction...."

Shri Bagadia also pointed out that in a number of cases, this Court has taken the view that the provisions of section 43B were retrospective in operation. It is, thus, clear that the deduction is required to be allowed for the amount of the sales tax paid before the date prescribed for filing of the return u/s 139(1).

The question posed and projected is, thus, a concluded question and presents no doubt or difficulty.

In the circumstances, we answer the question in the affirmative, i.e., in favour of the assessee and against the revenue. This miscellaneous civil case is, thus, disposed of as noted above, but without any order, as to costs.