Case Law Details
Indian Metal and Ferro Alloys Ltd Vs CIT (Orissa High Court)
The purpose of Section 43B of the Act was to ensure that a liability could be claimed as deduction only if the Assessee has actually parted with the sum without any recourse to it thereafter. In the present case, the interim stay granted in favour of the Assessee was only to ensure that the disputed amount of electricity duty did not go to the State Government. Short of such ‘actual’ payment, the Assessee was permitted, first by the High Court and then by the Supreme Court, to deposit the disputed amount of duty in a ‘no-lien’/escrow account. The very nature of the stay was to prevent the State Government from having access to the amount placed in such no-lien/escrow account. Therefore, while it may be correct to say that the Assessee ‘paid’ the amount in dispute, it paid it only into an account from which the State Government could not withdraw the amount. In other words, under the orders of this Court as well as the Supreme Court, the State Government was prevented from having access to the sum in the said account.
The question then arises is whether the above kind of payment will satisfy the requirement that the Assessee should have ‘actually paid’ the electricity duty amount. In interpreting the provision, emphasis has to be placed on the expression ‘actually’. A payment envisages a payer and a payee. If only one part is fulfilled viz., the payer has made the payment, but the payee has not received it, then it cannot be said that the sum has been ‘actually’ paid. While the Assessee as payer may have parted with the amount, it has not totally lost control over it. The payment has been made conditional and it has been ensured that if the Assessee ultimately succeeds in the litigation, the amount will not be actually paid to the State Government. Therefore, a via media has been put in place whereby the Assessee does not fully lose control of the money or has no recourse to it after having paid it. The sum has been paid into a no-lien/escrow account, and the State Government does not have access to it. In the considered view of the Court, such payment of the disputed amount of electricity duty this will not satisfy the requirement of the amount having been ‘actually paid’ for the purposes of claiming deduction under Section 43 B of the Act.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. This appeal by the Assessee is directed against an order dated 13th June 2014 passed by the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack (ITAT) in ITA No.521/CTK/2013 for the Assessment Year (AY) 2009-10.
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