COMMISSIONER OF INCOME TAX Vs. GORELAL DUBEY

JUDGEMENT

(1.) THIS is an income-tax reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue and the following question of law has been referred by the Tribunal for answer by this court :

(2.) THE brief facts giving rise to this reference are that the assessee in its return for the assessment year 1984-85 had among others claimed a deduction of Rs. 76,956 towards its liability for payment of royalty. This claim was disallowed by the Assessing Officer in view of the provisions of Section 43B of the Income-tax Act, 1961. According to the Assessing Officer, the payment of royalty was a levy to which provisions of Section 43B were applicable. THE appeal of the assessee against the order of the Assessing Officer was dismissed by the Commissioner of Income-tax (Appeals). On further appeal before the Tribunal, the Tribunal held that only tax and duty was disallowable under the provisions of Section 43B of the Income-tax Act. It was explained that a tax or duty was a compulsory extraction of money by public authority for public purposes enforceable by law and was not a payment for services or goods. It was further held that a tax or duty was not and need not be supported by any consideration or services rendered in turn or goods acquired. Royalty, on the other hand, in the opinion of the Tribunal was for consideration of the goods, i.e., the limestone, being extracted by the assessee from the quarry. According to the Tribunal, there was an element of quid pro quo between the persons who paid the royalty and the public authority which imposed it. According to the Tribunal, royalty was a contractual payment made by the assessee for extracting lime from the land. THE Tribunal, accordingly, allowed the appeal of the assessee. Hence, an application was made for making reference to this court and, accordingly, the aforesaid question has been referred by the Tribunal for answer by this court.

(3.) IN this view of the matter, the view taken by the Tribunal appears to be incorrect. Hence, we answer this reference against the assessee and in favour of the Revenue.