2000 (1) TMI 17 - HC - Income Tax

Summary

Issues Involved:

1. Applicability of Section 43B of the Income-tax Act, 1961, to 'kist' amounts payable to the Government.
2. Interpretation of 'kist' as 'tax or duty' under Section 43B.
3. Retrospective effect of the amendment to Section 43B by the Finance Act, 1988.
4. Validity of loss return filed u/s 237 and disallowance of certain expenses.

Summary:

1. Applicability of Section 43B of the Income-tax Act, 1961, to 'kist' amounts payable to the Government:

The primary issue across multiple I.T.R.Cs. was whether the 'kist' amount payable to the Government by the assessee could be brought within the purview of Section 43B of the Income-tax Act, 1961. The Tribunal consistently held that 'kist' amounts do not fall under the ambit of Section 43B. The court upheld this view, stating that 'kist' or rental payments under the Karnataka Excise Act, 1965, are not in the nature of tax, duty, cess, or fee, and thus, Section 43B is not applicable.

2. Interpretation of 'kist' as 'tax or duty' under Section 43B:

The court examined whether 'kist' could be considered as 'tax or duty' under Section 43B. It referred to various judgments, including Nashirwar v. State of Madhya Pradesh and D. Cawasji and Co. v. State of Mysore, which clarified that 'kist' is a consideration for the privilege granted by the Government for manufacturing or vending liquor and not a tax or duty. The court concluded that 'kist' is neither excise duty nor tax, and thus, Section 43B does not apply.

3. Retrospective effect of the amendment to Section 43B by the Finance Act, 1988:

In I.T.R.C. No. 32 of 1996, the question was whether the amendment to Section 43B by the Finance Act, 1988, which included 'cess or fee' in clause (a), had retrospective effect from April 1, 1984. The Tribunal held that the amendment is prospective from April 1, 1989, and does not have retrospective effect. The court agreed with this interpretation, stating that the legislative intent was clear in making the amendment prospective.

4. Validity of loss return filed u/s 237 and disallowance of certain expenses:

In I.T.R.C. No. 745 of 1998, the issues were whether the loss return claiming refund was validly filed u/s 237 and whether the disallowance of certain expenses was justified. The Tribunal held that the return was validly filed u/s 139(4) in support of the claim of refund u/s 237, notwithstanding the provisions of Section 139(10). The court upheld this view. Additionally, the Tribunal's decision to uphold the disallowance of Rs. 22,71,792 claimed by the assessee was also affirmed by the court.

Conclusion:

The court concluded that 'kist' amounts payable to the Government by the assessee do not fall within the purview of Section 43B of the Income-tax Act, 1961, as they are not in the nature of tax, duty, cess, or fee. The amendment to Section 43B by the Finance Act, 1988, is prospective and not retrospective. The loss return filed u/s 237 was valid, and the disallowance of certain expenses was justified. The references were answered in favor of the assessee and against the Revenue.