By K. B. Bhujle | Advocate
New Page 1
32. Business expenditure :
Deduction only on actual payment : Disallowance u/s.43B of Income-tax Act, 1961
: A.Ys. 2002-03 to 2005-06 : Electricity Board collecting electricity duty from
customers as agent of State : S. 43B not applicable to Electricity Board.
[Kerala State Electricity
Board v. Dy. CIT, 329 ITR 91 (Ker.)]
In the relevant years, the
Assessing Officer made disallowances u/s.43B of the Income-tax Act, 1961 in
respect of the electricity duty collected by the assessee Electricity Board and
paid to the Government as the agent of the Government. The disallowance was
confirmed by the Tribunal.
On appeal by the assessee,
the Kerala High Court reversed the decision of the Tribunal and held as under :
“(i) On a plain reading of
S. 43B, we are of the opinion that the only clause, if at all relevant in the
context of the facts of the appellant’s case is clause (a) which deals with
“any sum payable by the assessee by way of tax, duty, . . . . . under any law
for the time being in force”. In our opinion, the words ‘by way of tax’ are
relevant as they are indicative of the nature of liability. The liability to
pay and the corresponding authority of the State to collect the tax (flowing
from a statute) is essentially in the realm of the rights of the sovereign,
whereas the obligation of the agent to account for and pay the amounts
collected by him on behalf of the principal is purely fiduciary.
(ii) The nature of the
obligation, in our opinion continues to be fiduciary even in a case wherein
the relationship of the principal and agent is created by a statute. We are of
the opinion that when S. 43B(a) speaks of a sum payable by way of tax, etc.,
the said provision is dealing with the amounts payable to the sovereign qua
sovereign, but not the amounts payable to the sovereign qua principal.
(iii) We are, therefore,
of the opinion that S. 43B cannot be invoked in making the assessment of the
liability of the appellant under the Income-tax Act with regard to the amounts
collected by the appellant pursuant to the obligation cast on the appellant
u/s.5 of the Kerala Electricity Duty Act, 1963.”
