TMI Blog1996 (10) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, the Tribunal was right in holding that the loss amounting to Rs. 2,97,356 in respect of the milk plant discarded and written off by the applicant during the previous year is not allowable under section 45 of the Income-tax Act, 1961 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the surtax payable by the applicant under the Companies (Profits) Surtax Act, 1964, for the corresponding surtax assessment year cannot be allowed as a deduction in computing its total income ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 50,000 paid to the Himachal Pradesh Government for obtaining a licence for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance before the Tribunal on the judgments in Hindustan Commercial Bank Ltd., In re [1952] 21 ITR 353 (All), Travancore Rubber and Tea Co. Ltd. v. Commr. of Agrl. I.T. [1961] 41 ITR 751 (SC) and CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC). The Tribunal had distinguished those decisions and pointed out that the expenditure of a sum of Rs. 50,000 for obtaining the licence will not be covered by those decisions. Our attention has been drawn to the judgment of the Patna High Court in Sheikh Rahmat Ali v. CIT [1960] 39 ITR 506. The Bench of that court has taken the view that the amount of licence fee paid by an assessee for carrying on his business is an outgoing and a deduction from the profits of the business and similarly when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be determined from the practical and business view point and in accordance with sound accountancy principles, eschewing the legalistic approach. A licence fee is revenue expenditure, and payments made to the State for a licence or permit are none the less deductible although the licence or permit may carry with it an exclusive right, where the 'monopoly' or the exclusive character of the right is incidental to the licence or permit. Annual payments made to the State, in lieu of tax on motor vehicles per trip, for the exclusive right to ply buses on a certain route, are revenue disbursements, and so also are royalties paid to the State for a monopoly right to excavate raw materials or stock-in-trade or for an exclusive licence to manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench held that it was capital expenditure and cannot be deducted from the total income. That decision may not by itself be applicable to the facts of the present case, but as stated earlier we have to see the nature of the licence fee paid by the assessee to the Government of Himachal Pradesh. Admittedly, the fee was paid under the provisions of the Punjab Excise Act and the Punjab Distillery Rules, which are applicable to the State of Himachal Pradesh. Section 21 of the Punjab Excise Act provides for establishment or licensing of distilleries and breweries. The relevant part of the section reads : " The Financial Commissioner, subject to such restrictions or condition as the State Government may impose, may ... (c) license the constr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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