1990-VIL-80-ITAT-DEL

Equivalent Citation: ITD 034, 286,

Income Tax Appellate Tribunal DELHI

Date: 24.05.1990

PUROLATOR INDIA LIMITED.

Vs

INSPECTING ASSISTANT COMMISSIONER.

BENCH

Member(s)  : A. KALYANASUNDHARAM., M. A. BAKSHI.

JUDGMENT

Per A. Kalyanasundharam, A.M. -- The assessee, a limited company has preferred this appeal aggrieved by the order of the CIT(A), dt.19th Mar. '87. In this appeal the assessee has raised three grounds. The first relates to the restriction of the quantum of expenditure met by the company on the staff, when the staff entertained customers. The second relates to consideration of motor car running and maintenance for working out the disallowance u/s. 37(3A) & (3D). The third relates to the non-allowing of excise duty liability provided, which could not be paid as its recovery was stayed by the High Court and therefore, should be treated as paid within the meaning of sec. 43B of the Act.

2. [This para is not reproduced here as it involves minor issue.]

3. The second issue, relating to the consideration of running and maintenance of car under sec. 37(3A) & (3D), the submission made by the counsel Sh. Vohra was that, sec. 31 allows the deduction for the running and maintenance of the cars and that sec. 37 does not override the provisions of sec. 31 and therefore, the consideration of these expenses u/s. 37(3A) & (3D) for disallowance was not proper. The DR pleaded that, sec. 37 begins with the words 'notwithstanding anything contained in sub-sec. (1)' which provides for consideration of the claim of expenses which are not specifically provided for deduction under sections 30 to 36 of the Act and therefore, clearly overrides the provisions as are contained in sec. 31 of the Act.

4. On this issue, we have given our careful consideration as also the various papers that have been filed in the paper book running to 55 pages, which are certified to be on the record of the assessing officer and the first appellate authority. Sec. 37(1) has been provided to consider expenses which have been incurred by an assessee in the carrying out of his business, which expenses have not been specifically so provided in any of the sections 30 to 36 of the Act. This is obvious from the section which states : "Any expenditure (not being expenditure of the nature described in sections 30 to 36)". The other restriction in the section is that the expenditure should not be either personal or capital in nature. The sub-section (3A) begins with the words "notwithstanding anything contained in sub-section (1)" and therefore, the claim of the revenue was that, all expenditure including those considered under secs. 30 to 36 are caught and therefore, the running and maintenance of motor cars though otherwise allowable, but in view of the aggregation u/s. 37(3A) & (3D), part of the expenditure would need to be disallowed. The fundamental rule of interpretation of the statute is that, it needs to be interpreted as it reads and basing on this rule, when we read the section, it is obvious that, the words "notwithstanding anything contained in sub-section (1)" mean that, the expenditure other than those which are governed by sections 30 to 36 of the Act as are specified to be considered u/s. 37(1) of the Act, are overridden and therefore, by virtue of this provision, the running and maintenance of motor car, which are normally allowable by sec. 31 of the Act, would have to be considered under sec. 37(3A) of the Act. The sub-sec. (3D) of sec. 37 makes it further clear that, in case of an assessee who derives income from hiring of car, the provisions of aggregation would not apply. We are therefore of the opinion that, there is no infirmity in the conclusion drawn by the CIT(A) and we confirm the same.

5. The last issue relates to the provision for excise duty payable on certain manufacturing expenses, which levy has been disputed by the assessee and the assessee had preferred writ against the levy before the Delhi High Court, which vide its order dt. 8th Oct. '82 had granted stay of the recovery of the excise duty on the manufacturing expenses on the condition that, the assessee shall furnish the bond of the value of the duty leviable on the post-manufacturing expenses and also furnish bank guarantee to the extent of 25% of such duty, each time it desires to clear the manufactured goods from its factory. The counsel for the assessee Sh. Vohra, submitted that, the three Tribunal decisions which have been placed by him at pages 39 to 55, clearly have held that, the payment of tax or duty though paid subsequent to the accounting period relevant to the asst. year, but before the due date, is to be treated as paid within the year itself and therefore, on the same basis, the amounts of duty having been stayed by the High Court, and the assessee having provided the bonds plus the bank guarantee, whenever it had lifted the goods, should also be treated as paid within the year itself. The DR only pleaded that, the conclusion of the authorities are just and proper.

6. We have considered the rival submissions. The contention of the assessee rests on the direction of the Delhi High Court order, which had stayed the recovery of excise duty on the post-manufacturing expenses.

The Delhi High Court in its order dt.8th Oct. '82have ordered--

"Till the next date, the respondents will allow the petitioners to clear their goods from their factory on paying duty on the assessable value arrived at after excluding post-manufacturing expenses, provided that the petitioners give a bond in form B-13 for the difference in duty as assessed by the respondents and that admitted to as due by the petitioners, and also furnish a bank guarantee for 25% of the said difference to the satisfaction of the respondent no. 3. The bank guarantees shall be furnished within three weeks."

The suit preferred by the assessee was instituted against the very amendment to the existing provision to the Excises & Salt Act, by which element of post-manufacturing expenses were to form part of the cost of goods, for purposes of levy of excise duty. The amendment was to the effect of the manufacturer being called upon to pay excise duty on the cost of goods manufactured, including the cost of postmanufacturing expenses, incurred on such goods, whenever the manufacturer proposed to remove the goods from the workshop. The assessee challenged the very amendment to the provisions and during the pendency of the outcome of the challenge, applied for stay of recovery of the demand by the excise authorities of the excise duty to the extent of the post-manufactured expenses. It was on this basis that, the Delhi High Court ordered that, the excise authorities should permit the removal of goods by the assessee on the assessee furnishing a bond for a like amount of the duty payable together with a bank guarantee for 25% of such duty. The assessee has afforded to treat the provision of the bond and the bank guarantee as equivalent to actual payment and on this basis had claimed that it had complied with the requirement of section 43B of the Act. The word "Bond" has been defined to mean "a writing of obligation to pay a sum". This means that it is an undertaking given by the author of the bond that he is binding himself to pay the payee a certain sum of money. The section 43B provides that deduction would be allowed of duty, taxes, etc., if the same is paid during the year. The word "paid" means "satisfied". The bond gives the right to the payee to enforce payment from the author while the payment satisfies the payee, ie., the former is the beginning while the latter is the end of the transaction. The claim of the assessee that provision of bond should be treated as payment could be accepted if and only if, the two are synonymous but unfortunately the former is a step prior to actual payment and therefore, could not be termed as payment. The Tribunal decisions relied upon by the assessee is of no assistance to the assessee for the reason that, in all those cases, the sales tax and other levies collected fell due for payment to the authorities on a date which date fell subsequent to the close of the accounting period and that the deposits in fact were made on such due dates and that, the assessee had only complied with the provisions of that Act. In the instant case, as observed earlier, the assessee merely gives in writing its promise to pay the duty at certain future date, and that too if the decision is against the assessee. Thus, the very nature of the claim though statutory, but in view of the conditions specified in sec. 43B that deduction will be permissible only when the duty, etc., are actually paid, the claim of the assessee is rejected.

7. In the result the appeal is dismissed

 

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