Compounding fee under trade tax scheme cannot be fixed permanently at 22% without statutory or scheme-based authority.

Compounding tax liability under Section 7-D of the U.P. Trade Tax Act is treated as a contractual lump-sum arrangement in lieu of actual tax, but the scheme did not fix the compounding fee at 22% of royalty for all assessment years. The State retained power to vary the rate under the proviso to Section 7-D, and in the absence of a statutory basis or an express scheme clause fixing the rate for the entire period, the claim for a permanent lower rate had no legal support.

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Issues: Whether the compounding fee under the compounding scheme could be claimed at a fixed rate of 22% of the royalty amount for the entire period, and whether the revisionist was entitled to treat the compounding arrangement as a composite one for all assessment years.

Analysis: Compounding of tax liability under Section 7-D of the U.P. Trade Tax Act, 1948 is treated as a contractual arrangement under which a lump sum is accepted in lieu of the actual tax liability. The scheme did not stipulate that the rate of compounding fee would remain fixed at 22% of royalty for the entire period. It only indicated continued benefit of the scheme for subsequent periods, while the State retained the statutory power to vary the rate under the proviso to Section 7-D. In the absence of an enabling statutory provision or a specific clause in the scheme fixing the rate for all years, the claim for a lower, fixed rate had no legal basis.

Conclusion: The claim for compounding fee at 22% for the relevant assessment year was not able, and the Tribunal's rejection of the revisionist's contention was .

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