Facts of the Case

The present appeal was filed by the Revenue before the Delhi High Court challenging the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2005–06. The dispute arose regarding the allowability of deduction of customs duty amounting to ₹23,67,21,074/- under Section 43B of the Income-tax Act, 1961, in relation to imported components which had been utilized for export purposes during the relevant financial year. The Revenue contested the deletion of the addition made by the Assessing Officer.

Issues Involved

  1. Whether the ITAT was justified in deleting the addition of customs duty under Section 43B of the Income-tax Act, 1961?
  2. Whether customs duty paid on imported components used for export by the end of the financial year qualifies for deduction under Section 43B?
  3. Whether such actual payment satisfies the statutory requirement for claiming deduction?

Petitioner’s Arguments (Revenue)

  • The Revenue argued that the ITAT erred in deleting the addition made by the Assessing Officer.
  • It was contended that the deduction claimed by the assessee in respect of customs duty was not allowable under the factual matrix of the case.
  • The Revenue sought restoration of the addition on the ground of improper application of Section 43B.

Respondent’s Arguments (Assessee)

  • The assessee, Maruti Suzuki India Limited, contended that the customs duty had been actually paid during the relevant previous year.
  • It was submitted that Section 43B permits deduction on actual payment basis irrespective of the method of accounting.
  • Since the imported components had already been utilized for export before the end of the year, the deduction was rightly allowable. 

Court Findings / Observations

The Delhi High Court observed that the issue involved in the present appeal was already covered by its earlier decision in ITA No. 250 of 2005. The Court held that the question of law must be answered in favour of the assessee and against the Revenue. The Court affirmed the findings of the ITAT and upheld the deletion of the addition made under Section 43B.

Court Order / Final Decision

The appeal filed by the Revenue was dismissed. The High Court held that the deduction claimed by the assessee towards customs duty paid on imported components used for export was allowable under Section 43B of the Income-tax Act, 1961.

Important Clarification

This judgment reinforces the principle that under Section 43B, statutory liabilities such as customs duty become allowable deductions upon actual payment, irrespective of whether the goods are consumed, sold, or exported during the relevant accounting period. It also clarifies that where precedent already settles the issue, the Court will follow judicial consistency.

Sections Involved

  • Section 43B – Certain deductions to be allowed only on actual payment
  • Income-tax Act, 1961

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:7625-DB/SMD07122017ITA1722012.pdf

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