Business expenditure : Disallowance u/s.43B of Income-tax Act, 1961 : Luxury tax deferral scheme : Benefit under CBDT Circular Nos. 496 and 674 with reference to sales tax should be given for luxury tax also.

[CIT v. Eastbourne Hotels
(P) Ltd., 233 CTR 86 (HP)]

The assessee had claimed
that in view of the luxury tax deferral scheme the payment of luxury tax be
deemed to be made in the year in which it fell due and accordingly requested not
to make any disallowance of luxury tax u/s.43B of the Income-tax Act, 1961. The
Assessing Officer disallowed the claim. The Tribunal allowed the assessee’s
claim.

On appeal by the Revenue,
the Himachal Pradesh High Court upheld the decision of the Tribunal and held as
under :

“(i) The argument of the
Revenue that the CBDT Circular Nos. 496 and 674 make reference to the Sales
Tax Act only and not to luxury tax and, therefore, do not cover the luxury tax
deferral scheme is wholly without force. Deferral schemes for grant of
incentives whether under the Sales Tax Act or any other Act have the same
effect. The purpose is to encourage the industry. The Circulars issued by the
CBDT relate to the manner in which S. 43B has to be interpreted. This
interpretation has to be consistent for every tax deferral scheme and the
interpretation cannot change from Act to Act.

(ii) The CBDT has not
granted any exemptions from the provisions of S. 43B, but has held that if its
instructions are complied with then it will be deemed that the requirements of
S. 43B has been met. This will be applicable across the board to all Acts and
cannot be limited only to the Sales Tax Acts.

(iii) However, before
taking the benefit of the deferral scheme the assessee must produce before the
Assessing Officer the requisite certificates showing that it is covered under
the deferral scheme.”