Kist under excise arrangement treated as consideration, not duty or tax, so section 43B disallowance did not apply.

Kist payable under the excise arrangement was treated as consideration for obtaining the exclusive right to vend liquor, not as excise duty or tax. On that construction of the Karnataka Excise Act, 1965 and the relevant notifications, it was held that the amount was not a statutory impost covered by section 43B of the Income-tax Act, 1961, and therefore no disallowance under that provision arose. The reference was answered in favour of the assessee and against the Revenue.

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Issues: Whether kist payable under the excise arrangement is a duty or tax so as to attract disallowance under section 43B of the Income-tax Act, 1961.

Analysis: The liability was examined in the light of the Karnataka Excise Act, 1965 and the governing notifications. The amount described as kist was treated as consideration for obtaining the exclusive right to vend liquor and not as excise duty or tax. It was therefore not a statutory impost of the kind covered by section 43B.

Conclusion: Kist is neither duty nor tax and does not fall within the purview of section 43B of the Income-tax Act, 1961. The reference is answered against the Revenue and in favour of the assessee.

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