Constitutional validity of clause (f) of Section 43B of Income Tax Act, 1961

Union of India & Ors. Vs Exide Industries Limited & Anr. (Supreme Court)

BACKGROUND 

In the present case, the constitutional validity of Section 43B (f) of the Income Tax Act, 1961 (the Act)  is under-challenged, which arises out of the decision of  Hon’ble Calcutta High Court (the High Court) in case of Exide Industries Ltd vs. Union of India vide order dated A.P.O. 301 OF 2005 IN W.P. NO. 2512 OF 2002 dated 27.06.2007, wherein the Respondent had filed a Writ petition contending that Section 43B (f) of the Act was ultra vires in the law of the land since the assessee being a body corporate was entitled to maintain its accounts by the mercantile system of accounting which is permissible in law.

The ruling of the High Court reached up to Apex Court (the Court) in the present case wherein the Court has analysed the Section 43B since inception along with its objects and also critically observed the intension of the legislature behind the insertion of clause (f) of Section 43B of the Act. Court has also elucidated critically on the powers of the legislature to enact any provisions in the Act in light of various judicial precedents and discussed the Constitutional validity of clause (f) of Section 43B of the Act considering the grounds on which the High Court has held clause (f) of Section 43B of the Act as unconstitutional.

FACTS

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