G.S. Singhvi, J.
1. The Income-tax Appellate Tribunal, Delhi Bench 'C', Delhi (for short, 'the Tribunal') has, at the instance of the Revenue, referred the following question of law for the opinion of this Court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 25,64,340 made under Section 43B of IT Act, 1961, on account of unpaid liability of CST, sales-tax and surcharge payable.'
2. For the asst. yr. 1985-86, the assessee filed a return declaring nil income. The AO finalised the assessment under Section 143(3) of the IT Act, 1961 (for short, 'the Act), at income of Rs. 47,40,680. He made an addition of Rs. 11,42,107 on account of unpaid sales-tax liabilities and under Section 43B of the Act. The CIT(A), Faridabad, deleted the aforesaid addition. The Revenue as well as the assessee challenged the appellate order. Vide its order dt. 15th Jan., 1993, the Tribunal dismissed the appeal of the Revenue and allowed the one filed by the assessee. The extracts of para 5 of the Tribunal's order, which contain discussion on this issue, are reproduced below :
'There is no dispute that the assessee discharged liability in respect of entire sum of Rs. 25,64,340 before the due time of filing of return for the asst. yr. 1985-86 and on the dates mentioned by the learned CIT(A). The view taken by the learned CIT(A) in the impugned order is fully supported by the decision of Hon'ble Patna and Calcutta High Courts in the cases of Jamshedpur Motor Accessories Stores v. Union of India and Ors. : [1991]189ITR70(Patna) and CIT v. Sti Jagannath Steel Corpn. : [1991]191ITR676(Cal) . The learned Departmental Representative relied upon contrary view taken by Hon'ble Delhi High Court but that is not of much help as the present case does not fall within the jurisdiction of Hon'ble Delhi High Court and we are inclined to take the view favouring the assessee when two reasonable views are possible, fn the light of above observations, we see no justification for sustaining any part of addition of Rs. 25,64,340 disallowed under Section 43B of IT Act.'
3. We have heard the learned Counsel for the parties and perused the record. In Allied Motors (P) Ltd. Etc. v. CIT : [1997]224ITR677(SC) , their Lordships have interpreted Section 43B of the Act and laid down the following proposition :
'Section 43B of the IT Act, 1961, was inserted w.e.f. 1st April, 1984, to discourage taxpayers who did not discharge their statutory liability of payment of excise duty, employer's contribution to provident fund, etc., for long periods of time, but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year. After the insertion of Section 43B, even if the assessee had regularly adopted the mercantile system of accounting, the amount of tax payable by the assessee could be deducted only in the year in which the sum was actually paid and not in the year in which the assessee incurred the liability to pay that tax. However, an assessee who had collected sales-tax in the last quarter of the accounting year and deposited it in the treasury within the statutory period falling in the next accounting year, was not entitled to claim any deduction for it. This was not intended by Section 43B. To obviate this kind of unexpected outcome of Section 43B, the first proviso was added in Section 43B by the Finance Act of 1987. The proviso makes it clear that the section will not apply in relation to any sum which is actually paid by the assessee in the next accounting year, if it is paid on or before the due date for furnishing the return of income in respect of the previous year, in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee along with the return. However, 'any sum payable' in Clause (a) of Section 43B was open to the interpretation that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. Explanation 2 was, therefore, added by the Finance Act, 1989, with retrospective effect from 1st April, 1984, for the purpose of removing any ambiguity about the term 'any sum payable' under Clause (a) of Section 43B.
Section 43B, the first proviso to Section 43B and Expln. 2 have to be read together as giving effect to the true intention of Section 43B. Explanation 2 being retrospective, the first proviso has. also to be so construed. Without the first proviso, Expln. 2 would not obviate the hardship or the unintended consequences of Section 43B. The proviso supplies an obvious omission. But for the proviso the ambit of Section 43B becomes unduly wide bringing within its scope those payments which were not intended to be prohibited from the category of permissible deductions. The first proviso to Section 43B, therefore, has to be treated as retrospective.'
4. Following the law laid' down by the Supreme Court, we answer the reference in the affirmative, i.e., in favour of the assessee and against the Revenue.