TMI Blog2000 (1) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government by the assessee could not be brought within the purview of provisions of section 43B of the Income-tax Act, 1961?" In I. T. R. C. No. 32 of 1996, the following questions of law have been referred : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that kist payable by the assessee cannot be considered to be coming within the ambit of the expression 'tax or duty' and, hence, the provisions of section 43B would not apply to such payments ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the amendment brought to section 43B by the Finance Act, 1988, by way of insertion of the expression 'cess or fee' in clause (a) of the said section is only prospective in nature with effect from April 1, 1989, and would not have any retrospective effect from April 1, 1984 ?" In I. T. R. C. No. 745 of 1998, the following questions of law have been referred : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding the loss return claiming refund as having not been filed under section 237 of the Act, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y' for purpose of provisions of section 43B?" In I. T. R. C. No. 342 of 1998, the following question of law has been referred : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that 'kist' payable by the assessee to the State Government towards the agreement he had made for acquiring the right to vend arrack was not susceptible to the provisions of section 43B being not 'tax' or 'duty' ?" In I. T. R. C. Nos. 409 and 410 of 1998, the following questions of law has been referred : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that 'kist' amount payable by an excise contractor under the State Excise Act cannot be treated as 'duty' for the purpose of the provisions of section 43B of the Act? Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that 'kist' amount payable by an excise contractor cannot be treated as 'duty' for the purpose of the provisions of section 43B of the Act ?" The facts of the case are, that, in respect of the assessment year 1984-85, the Income-tax Officer found that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be imposed for the privilege of carrying on any trade or calling providing luxuries. We shall now apply the aforesaid two propositions to determine whether shop rent can be regarded as a tax on luxuries. That the tax is levied on the vendor of liquors and not on the consumers of liquor, is not, by itself, a factor that militates against the tax being a tax on luxuries. But the material question is whether shop rent is imposed for the privilege of selling alcoholic liquors or whether it is correlated to the quality, quantity or value of liquors sold by the vendor.... In the light of the opinion expressed by the majority of the Bench in Shinde Brothers' case, AIR 1967 SC 1512, we must hold that shop rent is not correlated to the quality, quantity, value of luxuries, i.e., liquors but is imposed for the privilege of vending liquor, and hence it cannot be regarded as a tax on luxuries coming within entry 62 in List II of the Seventh Schedule to the Constitution, even if it is assumed that alcoholic liquors are articles of luxury and shop rent is a tax." "Disposal of the privilege to vend liquor is not purely a matter of contract. It is governed by the statute, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed or ordered under the provisions of this Act or any other law for the time being in force relating to liquor or intoxicating drugs ;" Entry 51 of List 11 of the Seventh Schedule is as under : "51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India : (a) alcoholic liquors for human consumption ; (b) opium, Indian hemp and other narcotic drugs and narcotics, but not including medicinal and toilet preparations containing alcohol, or any substance included in sub-paragraph (b) of this entry." Learned standing counsel for the Department has drawn our attention to the Budget Speech of the Finance Minister to the following effect : "Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, employees' State insurance scheme, for long periods of time. For the purpose of their income-tax assessments, they nonetheless claim the liability as deduction even as they take resort to legal action, thus depriving the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny sum payable' shall mean any sum, liability for which has been incurred by the taxpayer during the previous year irrespective of the date by which such sum is statutorily payable." It is submitted that, the liability to pay rent is stated to be a statutory liability as was found in CIT v. Teesta Valley Co. Ltd. [1991] 187 ITR 657 (Cal). It is submitted that the rent amount required to be paid under section 17 read with section 24 of the Excise Act could be treated as fee as was considered in the case of Cooverjee B. Bharucha v. Excise Commissioner and Chief Commissioner, AIR 1954 SC 220, which reads : "The next contention that the charge of fee by public auction is excessive and is not in the nature of a fee but a tax ignores the fact that that licence fee described as a licence fee is more in the nature of a tax than a licence fee. One of the purposes of the regulation is to raise revenue. By the provisions of section 24, duties can be imposed on the manufacture, import, export and transport of liquor and other excisable articles. Revenue is also collected by the grant of contracts to carry on trade in liquors and these contracts are sold by auction. The grantee is given a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty. But then, the 'licence fee' which the State Government charged to the licensees through the medium of auctions or the 'fixed fee' which it charged to the vendors of foreign liquor holding licences in forms L-3, L-4 and L-5 need bear no quid pro quo to the services rendered to the licensees. The word 'fee' is not used in the Act or the Rules in the technical sense of the expression. By 'licence fee' or 'fixed fee' is meant the price or consideration which the Government charges to the licensees for parting with its privileges and granting them to the licensees. As the State can carry on a trade or business, such a charge is the normal incident of a trading or business transaction." In Om Parkash Agarwal v. Giri Raj Kishori [1987] 164 ITR 376 (SC), it was observed that, tax is a compulsory exaction of money by a public authority for public purposes enforceable at law and not a payment for services rendered. It was further observed : "This definition brings out, in our opinion, the essential characteristics of a tax as distinguished from other forms of imposition which, in a general sense, are included within it. It is said that the essence of taxation is compulsion, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious decisions of the apex court, observed that : "All the aforesaid judgments were considered by the Supreme Court in State of U. P. 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." In State of U. P. v. Sheopat Rai, AIR 1994 SC 813, after considering various decisions of the apex court, it was observed : "The term 'licence fee' and the term 'fixed fee' in the context of the U. P. Excise Act, the Ordinance and the Excise (Amendment) Rules being the consideration which the Government receives from a private party to part in the latter's favour with its exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1967, provides for payment of rent. The payment of rent has been treated to be a liability by virtue of section 24 of the Karnataka Excise Act, in the nature of excise duty; but it has been held by the apex court that it is not an excise duty, in order for the matter to fall under the provisions of section 43B, 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 tax, duty, cess or fee. It has been held in the judgments referred to above that the rent/kist is neither tax nor duty nor fee. Similarly, it cannot be called as "cess". The provisions of section 17 of the Karnataka Excise Act, 1965, have referred to the power to grant lease of the right to manufacture. Section 24 has conferred the additional power on the 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 countervailing duty leviable under sections 22 and 23. If the Legislature has use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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