Contractual liability to pay custom duty on importer’s behalf won’t be hit by section 43B, it’s not statutory liability

Oswal Agro Mills Ltd. v. CIT[2014] 42 taxmann.com 100 (Delhi)

The High Court held as under:

• Section 43B applies only in cases of statutory liability. By virtue of the said section a statutory liability is not deductable in the year in which it accrues, if the same remains unpaid. A deduction with respect to a statutory liability is allowed only on payment of the same;
• The liability to pay the amount of additional customs duty on behalf of the importers as and when they were called upon to discharge the same was clearly a contractual liability and not a statutory liability;
• Therefore, in the instant case, the question as to whether the said liability would be considered as deductible under Section43Bwould not arise;
• Even assuming that section 43B would apply to such contractual liability, the furnishing of a bank guarantee to importers would not be considered as actual payment under section 43B so as qualify for deduction under that section.