Income Tax - Deduction - Excise Duty paid under protest - ITAT allows

The provisions of section 43B provides :
“Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—
(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or
…………..
………………
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him.”
….” (emphasis supplied)

Under the Central Excise Act, no legal obligation is cast on the assessee to maintain any minimum amount, which should necessarily remain as balance in the credit of PLA. The only requirement of the Act is that excise duty shall be paid before removal of the goods. Further, after introduction of monthly payment system maintenance of PLA is redundant except for the month of March, where duty is to be paid by 31st March. In view of this, advance payment made under PLA cannot be said to be a liability incurred and hence a deduction allowable under the Act. Therefore provisions of section 43B cannot be invoked at all. Such advance payment under PLA is admissible as deduction in the year of adjustment made against liability to pay duty since the said duty is deemed to have been paid in the year of adjustment.
The provisions of section 43B are in the nature of restricting provisions for allowable deduction and not allowing provisions for inadmissible deduction. If the interpretation of the Tribunal in 2015-TIOL-1346-ITAT-DEL is followed, it may enable an assesse to either avoid of defer payment of income tax by making more advance payment under PLA for a particular year, which is not only against principles of matching but also not the intention of legislation.

V. G. IRKAL
Hospet

vasantirkal vasantirkal 28/08/2015