ALLIED MOTORS (P) LTD. versus COMMISSIONER OF INCOME TAX, DELHI

Citation: [1997] 2 S.C.R. 780 · Decided: 10-03-1997 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
ALLIED MOTORS (P) LTD. 
v . 
. . COMMISSIONER OF INCOME TAX, DELHI 
MARCH 10, 1997 
(A.M. AHMADI, CJ., SUJATA V. MANOHAR 
AND K. VENKATASWAMI, JJ.] 
Income Tax Act, 1961 : 
C 
Section 43-B first proviso-Retrospective operation of-Held : First 
proviso effective since inception of S. 43-B-Nature and object of proviso 
considered-Reasonable construction applied-Memorandum of Reasons of 
Finance Bill, 1989 and Depa1tme11tal Circular No. 550 dated 1-1-1990, 
considered-Interpretation of Statutes. 
D 
Section 43-B first proviso-Nature and object of-Held : Remedial in 
nature, designed to eliminate unintended consequences of S. 43-B which 
might cause undue hardship to the assessee in a specific situation and thereby 
make the provision unworkable or unjust-Memorandum explaining I . 
provisions in Finance Bill of 1983 and Budget Speech of Finance Minister 
E for 1983-84, considered. 
The petitioner-assessee filed an Income Tax Return for the Assess-
ment Year 1984-85 in which the assessee had claimed a deduction on 
account of sales tax collected by the assessee for the last quarter of the 
relevant previous year. The Income Tax Officer under Section 43-B of the 
F 
Income Tax Act, 1961 disallowed the deduction, which was claimed by the 
assessee. Section 43-B was inserted in the Act with effect from 1-4-1984. 
This Section as it originally, stood, did not contain the first proviso. This 
proviso was inserted by the Finance Act of 1987, which came into effect 
from 1-4-1988. Explanation 2 was added to Section 43-B by the Finance Act 
G of 1989 with retrospective effect from 1 '4-1984. These provisions were 
explained in the Memorandum of the Finance Bill of 1983 and the Budget 
Speech of the Finance Min1ster for the year 1983-84. The appeal tiled by 
the assessee before the Income Tax Appellate Tribunal was dismissed. 
Hence this appeal. 
H 
On behalf of the petitioner, it was contended that the first proviso 
780 
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ALLIED MOTORS (P) LTD. v. C.I.T. 
781 
which was inserted by the amending Finance Act. of 1987 should be given A 
retrospective effect and be read as forming a part of Section 43-B from its 
inception. 
Allowing the appeal, this Court 
HELD : 1. In view of the Memorandum explaining the provisions of B 
Section 43-B of the Income Tax Act, 1961 in the Finance Bill of 1983 and 
the Budget Speech of the Finance Minister for the year 1983-84, it is clear 
that Section 43-B aimed at the curbing the activities of those tax prayers 
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 C 
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. It was not realised that the language In which 
Section 43·B was·worded would cause hardship to those tax payers who 
had paid sales-tax within the statutory period prescribed for this paymeht, 
although the payment so made by them did not fall in the relevant previous D 
year. Hence, the first proviso was inserted in Section 43-B. The amendment 
.which was made by the Finance Act of 1987 in Section 43-B by inserting, 
inter alia, the first proviso, was remedial in nature, designed to eliminate 
' unintended consequences which may cause undue hardship to the assessee 
and which made the provision unworkable or unjust in a specific situation. E . 
[786-B, H, 787·A·E] 
2. Explanation 2 was added to Section 43-B of the Act by the Finance 
Act of 1989 with retrospective effect from 1-4-1984. The Memorandum of 
Reasons for the Finance Act, 1989 proceeds on the basis that Section 43-B 
read with the proviso takes care of the hardship situation and hence F. 
Explanation 2 can be inserted with retrospective effect to make clear the 
ambit of Section 43·B(a). Therefore, Section 43-B(a), the first proviso to 
Section 43-B and Explanation 2 have to be read together as giving effect 
to the true intention of Section 43-B. If Explanation is retrospective, the 
first proviso will have to be so construed. Read in this light also, the G 
proviso has to be read into Section 43-B from its inception along with 
Explanation 2. [788-B, 789-B·E] 
3. The Departmental Circular No. 550dated1·1·1990 shows that the 
,. departmental understanding also is that Section 43-B, the proviso and 
Explanation 2 have to be read together as expressing the true intention of H 
782 
SUPREME COURT REPO

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