Unpaid royalty liability is covered by section 43B because royalty is treated as tax for that purpose.

Unpaid royalty liability falls within section 43B of the Income-tax Act because royalty is treated as tax for that purpose. The Court noted that although a later decision revisited the characterisation of royalty, it continued to follow the Constitution Bench ruling in India Cement, which remains the governing principle. On that basis, section 43B applies to unpaid royalty, and the assessee's challenge fails.

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Issues: Whether the unpaid royalty liability was covered by section 43B of the Income-tax Act, 1961 on the footing that royalty is tax and not merely a contractual payment.

Analysis: The Court noted that the High Court had negatived the assessee's contention and that the later decision in Quarry Owners Association had revisited the characterization of royalty but had still followed the Constitution Bench ruling in India Cement. It was held that India Cement lays down the governing principle that royalty is tax for all purposes, including the operation of section 43B.

Conclusion: Section 43B applies to unpaid royalty liability, and the assessee's challenge fails.

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