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2000 DIGILAW 128 (KAR)

Commissioner of Income Tax v. Shiva and Co.

2000-02-10

T.N.VALLINAYAGAM, V.K.SINGHAL

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JUDGMENT T.N. Vallinayagam, J.—The Income Tax Appellate Tribunal has referred the following question of law arising" out of its order dated February 23, 1998, in respect of the assessment year 1987-88 : "Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in taw in holding that 'kist' is neither 'duty nor tax' and therefore, will not come within the purview of the provisions of Section 43B of the Income Tax Act, 1961 ?" 2. The facts of the case are that the assessee, a partnership firm, was carrying on the business of arrack contract for Perriyapatna Taluk. The Assessing Officer considered the debit of Rs. 28,01,135 to the trading account representing kist payable for the year ended June 30, 1986. He observed that the above amount included provision of Rs. 9,86,290 which was kist that was due for the year ended June 30, 1986. The Assessing Officer was of the view that with effect from April 1, 1984, any sum that is payable by the assessee by way of tax or duty could be allowed only when it is actually paid. He observed that the said provision had been amended which was effective from April 1, 1989, which was clarificatory in nature and that the clarification was that the term "tax or duty" will include any amount payable by whatever name called. He referred to the provisions of Section 24 of the Karnataka Excise Act, 1965, which states that the sum accepted in consideration of any grant or lease relating to any excisable article under Section 17 shall be excise duty. He further noted that the arrears of kist amount can be recovered as if it is arrears of land revenue. He accordingly concluded that the payment of rental arose on account of statutory obligation under the Karnataka Excise Act and did not involve any contractual obligation. He further observed that the shop rent arises on account of bid in accordance with the Karnataka Excise Act. He accordingly rejected the claim of the assessee that the rent payable could not be considered for disallowance under Section 43B of the Income Tax Act, 1961. He further observed that the shop rent arises on account of bid in accordance with the Karnataka Excise Act. He accordingly rejected the claim of the assessee that the rent payable could not be considered for disallowance under Section 43B of the Income Tax Act, 1961. He also noted the contention of the assessee on placing reliance on the Income Tax Appellate Tribunal, Cochin Bench decision, on an identical issue that rent payable in respect of liquor business is not a statutory liability and that the said decision has not been accepted by the Department and is being agitated in higher courts. 3. The Commissioner of Income Tax (Appeals) (the "C1T(A)"), considered the issue in para. 3 of his order and noted the submission of the assessee that kist is not excise duty so as to attract the provisions of Section 43B of the Act. The Commissioner of Income Tax (Appeals) noted that the issue had been considered in detail by the Tribunal, Cochin Bench, as well as the Tribunal. Bangalore Bench, and more recently in the case of M.D. Denegowda, Excise Contractor, wherein it was held that the kist or shop rent cannot be treated as duty as it is a payment for obtaining exclusive selling rights of toddy and arrack by bidding at excise auctions in pursuance of the Government notifications. He accordingly deleted the addition. 4. The Tribunal noted that the Commissioner of Income-lax (Appeals) had considered the notification issued by the State Government wherein it was stated that kist is not excise duty. The Tribunal noted that the Commissioner of Income Tax (Appeals) had deleted the disallowance after considering the notification and found that the action of the Commissioner of Income Tax (Appeals) was justified and accordingly upheld his order and rejected the plea of the Department. 5. The controversy is now covered by the decision of this court in ITRC No, 5 of 1996 Commissioner of Income Tax Vs. Sri Balaji and Co., D. Dasappa, Renukasri and Co., S.S.B. Gowdaiaha and Sons, Tirumal Traders, Sri Rajeshwari Enterprises, Anjanappa and Co. and P.K. Shankaranarayana and Co., (2000) 246 ITR 750 KAR. disposed of on January 5, 2000. 5. The controversy is now covered by the decision of this court in ITRC No, 5 of 1996 Commissioner of Income Tax Vs. Sri Balaji and Co., D. Dasappa, Renukasri and Co., S.S.B. Gowdaiaha and Sons, Tirumal Traders, Sri Rajeshwari Enterprises, Anjanappa and Co. and P.K. Shankaranarayana and Co., (2000) 246 ITR 750 KAR. disposed of on January 5, 2000. Following the same, we are of the view that the Tribunal was right in law in holding that "kist" is neither "duty nor tax" and, therefore, will not come within the purview of the provisions of Section 43B of the Income Tax Act. 1961. 6. The reference is accordingly answered in favour of the assessee and against the Revenue.