TaxTMI 
TaxTMI 
2010 (1) TMI 732
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....d extension fee crystalised during the year and therefore was an admissible expenditure for the A.Y. 1995-96? (b) Whether on the facts and in the circumstances of the case the ITAT was right in deleting the addition of Rs.3,62,51,690/- by ignoring the provision of Section 43 B of the Income-tax Act, 1961? The dispute relates to the assessment year 1995-96. The assessee is the H.P.Forest Corporation and is engaged in the business of felling, converting and selling of timber. It enters into agreement(s) with the Forest Department for this purpose. For the year in question, the assessee claimed deduction of a sum of Rs.3,62,51,690/- being the amount paid by it as royalty, sales tax, extension fee and damage bills relating t....
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....vision to the best of its estimate but actual liability was settled during the year by reconciliation with the Forest Department and therefore, liability arose during the previous year. Since liability has arisen during this year, it has to be allowed. After going through the decisions relied upon by ld. AR, we find that the issue is covered by the ratio of the decisions in the case of Calcutta Co. Ltd. vs. CIT 37 ITR 1(SC) and CIT v. Swadesh Cotton and Flour Mills Pvt. Ltd. 53 ITR 134 (SC). On the facts and circumstances of the case, we are of the view that the liability being contractual in nature has accrued during the year under appeal either reconciliation being done and therefore, it deserves to be allowed. Accordingly, we set-aside t....
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....come referred to in section 28 of that previous year in which sum is actually paid by him: Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) [or clause (c)] [or clause (d)] [or clause (e)] [or clause (f)] which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee alongwith such return:" According to the department, the payments made by the assessee on account of royalty, extension fees, damage bills, etc. a....
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....ny it was entitled to deduction of the said amount after the gross profits and it cannot be said that this liability is a contingent liability. In Gorelal Dubey vs. Commissioner of Incometax, (2001) 248 ITR 3, the Apex Court held that royalty is a tax and therefore, in terms of Section 43 B of the Incometax Act unpaid liability or royalty for extraction of limestone cannot be deducted. In Commissioner of Income-tax vs. Varas International Pvt. Ltd. (2006) 284 ITR 80 (SC), the question before the Apex Court was whether the fee paid under the Rules was amounted to tax or cess or not. It held as follows:- "10. We find that the order of the Commissioner of Income-tax(Appeals) is not very clear on this aspect. As fa....
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.... (2004) 4 SCC 584 and Dakshin Haryana Bijli Vitran Nigam Ltd. vs. Paramount Polymers Pvt. Ltd. (2006) 13 SCC 101. In our view these judgements are not at all helpful in deciding the matter. The question whether payment of Rs.3,62,51,690/- was on account of tax or other business expenditure was not considered by any of the authorities below. No plea was raised by the revenue before the authorities below that this amount was a tax and therefore, unless it was actually paid no deduction could be claimed under Section 43 B. The only plea taken was that the payment of the amount had not crystalised. The Tribunal held that the payment had crystalised in the particular year. This is a pure question of fact and not of law and we have to u....