1997 (2) TMI 92 - HC - Income Tax

Summary

Issues Involved:
1. Retrospective application of the amendment to section 43B(a) of the Income-tax Act, 1961.
2. Interpretation of section 2(10) of the Bengal Excise Act, 1909, and whether the privileged and specified fee under rules 2 and 6 of the Excise Rules can be construed as the fee used in section 43B(a) of the Income-tax Act, 1961.
3. Whether the fees payable by the assessee is excise duty and the validity of the addition made in the assessment.

Summary:

Issue 2: Interpretation of Section 2(10) of the Bengal Excise Act, 1909
The Tribunal held that the privileged and specified fee mentioned in rules 2 and 6 of the Excise Rules cannot be construed as the fee used in section 43B(a) of the Income-tax Act, 1961. The court examined the nature of the consideration when the State Government grants the exclusive privilege to manufacture or vend country liquor. It was determined that the fee or charges received by the Government for parting with its exclusive right to manufacture or vend intoxicants is neither a tax, duty, fee, nor cess. The Supreme Court's decisions in cases such as Har Shankar v. Dy. Excise and Taxation Commissioner and others were cited, which concluded that such fees are the price or consideration for parting with the State's privileges and are not taxes or duties.

Issue 3: Nature of Fees Payable by the Assessee
The Tribunal was justified in holding that the fees payable by the assessee were not excise duty. Section 43B of the Income-tax Act stipulates that deductions for sums payable by way of tax, duty, cess, or fee are only allowed in the year they are actually paid. Since the fees in question were not categorized as tax, duty, cess, or fee, the provisions of section 43B did not apply. The court affirmed that the amount payable by the assessee was neither tax nor duty nor fee nor cess, and thus, the assessee could claim the deduction without paying the licence fee to the State Government.

Issue 1: Retrospective Application of Amendment to Section 43B(a)
Given the conclusions on issues 2 and 3, the court did not find it necessary to address the retrospective application of the amendment to section 43B(a) of the Income-tax Act, 1961. Therefore, question No. 1 was sent back to the Tribunal unanswered.

Conclusion:
The court answered questions Nos. (2) and (3) in the affirmative and against the Revenue, and question No. (1) was sent to the Tribunal unanswered. There was no order as to costs.