Royalty for limestone quarrying is contractual consideration, not tax or duty, so section 43B disallowance failed.

Royalty paid for quarrying limestone was held to be contractual consideration for mineral extraction, not a tax or duty. Because section 43B applies only to sums payable by way of tax or duty under law, the unpaid royalty did not fall within that provision. The disallowance was therefore unsustainable and the assessee's claim was allowed.

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Issues: Whether royalty paid for quarrying limestone, remaining unpaid at the close of the year, was a tax or duty so as to attract disallowance under section 43B of the Income-tax Act, 1961.

Analysis: Section 43B applies only to sums payable by way of tax or duty under any law for the time being in force. Royalty for quarrying limestone was held to be a payment for the goods extracted and not a compulsory exaction without consideration. The presence of quid pro quo showed that the payment was contractual in nature and made in consideration of the mineral extracted for business use, even though it was calculated under mining provisions and paid to the State.

Conclusion: Royalty for quarrying limestone was not tax or duty within the meaning of section 43B, and the disallowance was unsustainable. The claim of the assessee was allowed.

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