Contractual licence fee is outside Section 43B when recovery as arrears does not make it a statutory levy.

Section 43B applies only to sums payable by way of tax, duty, cess or fee under a law in force, so a contractual licence fee does not qualify merely because it is recoverable as arrears of land revenue. The liability here arose from a negotiated agreement, not from a statutory impost, and the recovery mechanism under the Punjab Land Revenue Act affected only enforcement, not the character of the payment. Statutory royalty authorities were distinguished because those cases involved liabilities created by law. The disallowance was therefore held unjustified and the issue was decided in favour of the assessee.

---

---

Issues: Whether the licence fee payable to the NDMC was a contractual liability or a statutory liability for the purposes of section 43B of the Income-tax Act, 1961, and whether its recovery as arrears of land revenue brought it within the ambit of that provision.

Analysis: Section 43B permits deduction of sums payable by way of tax, duty, cess or fee under a law for the time being in force only on actual payment. The liability in question arose from an agreement entered into between the parties on a negotiated basis and was not imposed by any statute. The recovery clause under the Punjab Land Revenue Act merely prescribed the mode of recovery of unpaid amounts and did not convert the underlying contractual obligation into a statutory levy. The comparison with statutory royalty cases was held to be inapposite because those cases involved liabilities created by law, unlike the present contractual licence fee.

Conclusion: The licence fee was not a statutory fee within section 43B and, therefore, the disallowance was not justified; the issue was decided in favour of the assessee.

Ratio Decidendi: Section 43B applies only to statutory imposts payable under law, and a contractual payment does not fall within its scope merely because its recovery may be enforced as arrears of land revenue.

---