COMMISSIONER OF INCOME TAX Vs. POPULAR MINERALS

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur, has made a reference under Section 256(1) of the Income-tax Act, 1961, seeking opinion of this court on the following question :

(2.) THE facts giving rise to the instant reference application are that the respondent assessee-firm, Popular Minerals, is a registered firm deriving income from sale of unburnt china clay. THE assessee claimed outstanding liability on account of royalty at Rs. 1,82,964. In the opinion of the Assessing Officer, the outstanding liability which had not been paid during the mining year was not deductible and allowable, in view of the provisions of Section 43B of the Income-tax Act. THE order of the Assessing Officer was confirmed by the Commissioner of Income-tax (Appeals). However, the Tribunal held that the tax or duty or cess or fee in the context of Section 43B is a compulsory exaction of money by public authority for public purposes enforceable by law and not for that reason, a payment for service or goods. THE Tribunal further held that the royalty is paid as consideration for goods or services supplied. THE Tribunal accordingly allowed the appeal and directed the Assessing Officer to allow the liability in question for the assessment year under consideration. It is now no more res integra that the royalty is a tax and as such Section 43B is applicable to unpaid liability towards payment of royalty. Reference may made to the decision of the apex court in India Cement Ltd. v. State of Tamil Nadu [1991] 188 ITR 690. THE apex court after considering the issue of royalty in depth and detail held as under (page 707) :