INCOME TAX ACT, 1961

Section 43B

Business disallowance under section 43B - Deduction on actual payment - Rental under the Karnataka Excise Act, 1965 named as excise duty - Applicability of section 43B

AO noticed that assessee claimed deduction of rental undr the Karnataka Excise Act, 1965.in resect of vending toddy/arrack which though had not been paid to the government. Also, AO noticed that rentals were payable under section 17 of said Act and under section 24 it was considered to be an excise duty. Accordingly, AO invoked section 43B and disallowed deduction.Held: Rule 15 of General condition of Karnataka Excise Licences (General Condition Rules) 1967, provides for payment of rent. The payment of rent has been treated to be a liability by virtue of section 24 of Karnataka Excise Act, in the nature of excise duty; but it is not excise duty, in order to fall the matter under provision of section 43-B. The actual payment is contemplated to tax, duty, cess or fee by whatever name called the word 'by whatever name called' refers to tax duty, cess, or fee and therefore, the payment must be in the nature of the duty, cess or fee. In the instant case rent/kist was neither tax nor duty not fee. Similarly, it cannot be called as 'cess'. The provisions of section 17 of the Karnataka Excise Act, 1965 have referred to power to grant lease of right to manufacture. Section 24 have conferred additional power on State Government to accept payment of a sum or levy such licence fee or privilege fee as may be prescribed, in consideration of grant of lease or licence or both, by or under this Act. This power is in addition to any excise duty or counterveiling duty leviable under sections 22 and 23. If legislature has used a specific language then it cannot be stretched to include certain sums which are not in the nature of payment mentioned by the legislature. Payment of lease money/rental may be a statutory liability but however statutory liability does not come within the purview of section 43B. It is only that statutory liability which is in the nature of tax, duty, cess, or fee to which the provisions of section 43B are attracted since Kisth/Rental could not be considered to be falling under either of the items, the section 43B could not be invoked and as such disallowance could not be upheld.

Relied:CIT v. Varas International (P) Ltd. (1997) 225 ITR 831 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 1984-85

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