Section 43B Deduction Allowable for GST Paid Before ITR Due Date Even If Form 3CD Reflects Outstanding Liability: Bangalore ITAT Rules in Favour of Assessee
Overview of the Ruling
The Income Tax Appellate Tribunal, Bangalore Bench, in the case of Javid Bagwan Vs ITO Ward-1 & TPS, has delivered a significant ruling clarifying the scope and application of Section 43B of the Income Tax Act, 1961 in relation to GST payments made after the signing of the tax audit report but before the due date of filing the return of income. The Tribunal categorically held that the Centralised Processing Centre (CPC) cannot mechanically deny a deduction under Section 43B merely on the basis that Form 3CD reflects the liability as outstanding, without accounting for actual payments made within the permissible statutory window.
This ruling holds considerable practical significance for assessees who settle their statutory dues — such as GST — in the gap period between the signing of the tax audit report and the actual filing of the return of income.
Background and Facts of the Case
The Assessee's Position
The assessee, Javid Bagwan, filed his return of income for Assessment Year 2020-21 on 15.02.2021. While computing business income, the assessee had himself disallowed a sum of Rs. 5,73,500 under Section 43B of the Income Tax Act, 1961, representing GST liabilities that remained outstanding as at 31.03.2020.
However, the assessee also claimed a corresponding deduction of Rs. 5,73,216 under Section 43B on the ground that this amount had been paid before the due date of filing the return of income — i.e., before 15.02.2021. As a result, the net disallowance retained by the assessee in his own return was only Rs. 284, which he voluntarily included in his computation of total income.
The Balance Sheet Position
As per the annual accounts of the assessee, the GST payable appearing in the Balance Sheet as on 31.03.2020 stood at Rs. 6,13,468. Out of this amount:
- A sum of Rs. 39,968 was paid on 25.06.2020
- The remaining balance of Rs. 5,73,500 was still outstanding as on 30.12.2020, the date on which the tax audit report was signed
- Before the return was filed on 15.02.2021, the assessee paid Rs. 5,73,216, leaving only Rs. 284 as the net unpaid liability
The assessee also clarified that GST receipts and payments were not routed through the Profit & Loss Account, which is why the cash flow impact of these payments was not directly visible from the income statement.
Processing by CPC and the Resulting Dispute
Section 143(1) Intimation
When the CPC processed the return of income under Section 143(1) of the Income Tax Act, 1961, it issued an intimation on 03.11.2021. The CPC identified an apparent inconsistency between the disallowance made by the assessee in his computation — which was only Rs. 284 — and the figure of Rs. 5,73,500 appearing in the tax audit report (Form 3CD) as the outstanding GST liability.