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TMI Blog1997 (2) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in law in holding that the priviledged and specified fee as 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 ? (3) Without prejudice to questions Nos. (1) and (2) above, whether, on the facts and in the circumstances of the case and on a correct interpretation of the income-tax law and the State excise law, the Tribunal was justified in law in holding that the fees payable by the assessee was not excise duty and thereby deleting the addition made in the assessment in this regard ? " When this matter was taken up it was agreed between the parties that questions Nos. (2) and (3) be taken first and in case questions Nos. (2) and (3) are decided in favour of the Revenue, only then question No. 1 may be taken up and answered. Accordingly, we take up questions Nos. (2) and (3) first. Briefly stated, the facts leading to this reference are that the assessee is engaged in the business of manufacture and vending of country liquor. Under the Bengal Excise Act, 1909 (hereinafter referred to as the Act), and the Rules framed thereunder, the Government of West Bengal settles the right of manufacture and ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction can be claimed by him without paying the licence fee to the State Government. Learned counsel appearing for the Department has urged that the licence fee which the assessee is required to pay to the State Government for the purpose of obtaining licence for manufacture of country spirit is in the nature of fee and in any case it is a duty and as such without payment of such fee to the Government the assessee cannot claim any deduction under section 43B of the Act. This has been contested by learned counsel for the assessee. What he argues is that in fact the price/licence fee that the assessee is required to pay to the State Government for having permission/licence for manufacture of country liquor is neither a fee nor cess nor tax nor excise duty. In fact charge/consideration is something different from what has been enumerated in section 43B of the Income-tax Act and, as such, the assessee has rightly claimed deduction for the amount which has been stayed by the Calcutta High Court. On the arguments of learned counsel for the parties the first question that arises for consideration is what is the nature of the consideration when the State Government parts with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale by wholesale of country spirit in labelled and capsuled bottles shall not sublet or lease out the manufactory to any person nor shall take any person to become his partner. Rule 6, over which much emphasis has been laid by learned counsel appearing for the Department provides that the manufacturer shall pay the fees at the rates hereinafter provided by adjustment to the credit of the State Government in personal ledger accounts in the manner provided in the table. Learned counsel appearing for the Department on the strength of these rules argues that the nature of consideration is fee which is evident from a reading of rules 2, 3, 5 and 6 of the rules and, therefore, the consideration being fee the Assessing Officer has rightly decided not to allow the claim for deduction in respect of the dues which the assessee is required to pay to the State Government for which he has obtained an interim order from the High Court at Calcutta. To appreciate the argument of learned counsel for the Department we may bear in mind that the right to carry on business in intoxicants is not a fundamental right and it has been branded as abnormous business and a citizen is not entitled to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce or consideration or rental which the Government charges from the licensees for parting with its privilege in stipulated lump sum payment and is a normal incident of a trading or business transaction. It further says that the State has the exclusive right to manufacture and sell liquor and to sell the said right in order to raise Revenue. The rental is the consideration for the privilege granted by the Government for manufacturing or vending liquor. The rental is neither a tax nor an excise duty. The rental is the consideration for the agreement for grant of the privilege by the State Government. In State of Haryana v. Jage Ram, AIR 1980 SC 2018, three learned judges of the Supreme Court held that the amount which is paid by the vendors of intoxicants to the State Government for obtaining from the State Government the right to vend intoxicants is neither a fee nor excise duty but the price of the privilege which the State parted in favour of such vendors. In Synthetics and Chemicals Ltd. v. State of U.P. [1990] 1 SCC 109 ; AIR 1990 SC 1927, a Constitution Bench comprising of seven judges of the Supreme Court held that there is no fundamental right to carry on trade or busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not willing to pay the price as required by the Government for the grant of the privilege to manufacture and sell intoxicants. All the aforesaid judgments were considered by the Supreme Court in State of Uttar Pradesh v. Sheopat Rai, AIR 1994 SC 813, where it was held that the periodical licence for retail vend of foreign liquor granted on the basis of a " fixed fee " or " licence fee " connote and mean consideration received by the Government for parting with its exclusive privilege to deal in intoxicants and such fee is neither a tax nor a fee nor an excise duty nor cess and the same can only be levied under entry 8 of List 2 of Schedule VII to the Constitution. In that view of the matter, it now stands concluded that the fee or charges received by the Government for parting with its exclusive right to manufacture or vend intoxicants is neither a tax nor a duty nor a fee nor a cess. Section 43B of the Income-tax Act says that unless tax or duty or fee or cess, in whatever name the same may be called, is paid in fact during the concerned year the assessee shall not be entitled to the deduction in the matter of computation of his income. If the amount payable is neither ..... 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