COMMISSIONER OF INCOME TAX Vs. SHIVA AND CO

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has referred the following question of law arising" out of its order dated February 23, 1998, in respect of the assessment year 1987-88 :

(2.) THE facts of the case are that the assessee, a partnership firm, was carrying on the business of arrack contract for Perriyapatna Taluk. THE Assessing Officer considered the debit of Rs. 28,01,135 to the trading account representing kist payable for the year ended June 30, 1986. He observed that the above amount included provision of Rs. 9,86,290 which was kist that was due for the year ended June 30, 1986. THE Assessing Officer was of the view that with effect from April 1, 1984, any sum that is payable by the assessee by way of tax or duty could be allowed only when it is actually paid. He observed that the said provision had been amended which was effective from April 1, 1989, which was clarificatory in nature and that the clarification was that the term "tax or duty" will include any amount payable by whatever name called. He referred to the provisions of Section 24 of the Karnataka Excise Act, 1965, which states that the sum accepted in consideration of any grant or lease relating to any excisable article under Section 17 shall be excise duty. He further noted that the arrears of kist amount can be recovered as if it is arrears of land revenue. He accordingly concluded that the payment of rental arose on account of statutory obligation under the Karnataka Excise Act and did not involve any contractual obligation. He further observed that the shop rent arises on account of bid in accordance with the Karnataka Excise Act. He accordingly rejected the claim of the assessee that the rent payable could not be considered for disallowance under Section 43B of the Income-tax Act, 1961. He also noted the contention of the assessee on placing reliance on the Income-tax Appellate Tribunal, Cochin Bench decision, on an identical issue that rent payable in respect of liquor business is not a statutory liability and that the said decision has not been accepted by the Department and is being agitated in higher courts.

(3.) THE controversy is now covered by the decision of this court in ITRC No, 5 of 1996-CIT v. D. Dasappa [2000] 246 ITR 750. disposed of on January 5, 2000. Following the same, we are of the view that the Tribunal was right in law in holding that "kist" is neither "duty nor tax" and, therefore, will not come within the purview of the provisions of Section 43B of the Income-tax Act. 1961.