By K. B. Bhujle, Advocate
New Page 2
1 Business deduction : S. 43B of Income-tax
Act, 1961 : A.Y. 1999-00 : Deduction to be allowed on actual payment : Deposit
with customs authorities as per demand notice under the head Special Value
Branch (SVB) is deductible in the year of actual payment.
[CIT v. Hughes Escorts Communications Ltd., 170 Taxman
571 (Del.)]
In the previous year relevant to the A.Y. 1999-00, the
assessee company had paid Rs.26,60,128 by way of Special Value Branch (SVB)
deposit as per the demand notice issued by the Customs authorities. The said
amount was not claimed by way of deduction before the AO. The claim for
deduction was made for the first time before the CIT(A) by way of additional
ground. It was the contention of the assessee that the additional payment was
called a deposit pending final determination of the actual duty and it is an
amount that is to be paid on demand to the Customs authorities, that the
assessee really had no option but to make the payment. The CIT(A) allowed the
claim for deduction and held that if the whole or any part of this amount is
found to be not payable to the Customs authorities on the relevant goods, then
such amount shall be brought to tax u/s.41(1)(a) of the Act, in the relevant
year. The Tribunal upheld the decision of the CIT(A).
On appeal by the Revenue, the Delhi High Court upheld the
decision of the Tribunal and held :
“(i) The assessee really had no option but to make the
payment as per the demand notice issued by the Customs authorities. At the
time of making the payment it was not known whether the demand would fall
short of the actual liability or in excess of the actual liability. Taking
this into consideration, the Tribunal felt that it would not be appropriate to
limit the claim of the assessee only to the extent of the actual liability. It
was found that there is no error in directing the Assessing Officer to make a
verification with regard to the excess payment, if any, and to tax the amount
if it has not already been taxed. The Tribunal also limited the liability of
the actual amount to the assessment year under consideration.
(ii) We cannot find any fault in the view taken by the
Tribunal primarily because the liability was required to be discharged by the
assessee on demand and the assessee had no option but to make the payment.
This clearly falls within S. 43B(a) of the Act.”
