GUJARAT STATE FOREST DEVELOPMENT CORPN LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX
LAWS(IT)-1994-7-7
INCOME TAX APPELLATE TRIBUNAL
Decided on July 08,1994

Appellant
VERSUS
Respondents

JUDGEMENT

B.M. Kothari, Accountant Member - (1.) THE assessee's appeals relate to assessment years 1985-86 and 1986-87. THE revenue's appeal relates to assessment year 1986-87 only.
(2.) We will first deal with assessee's appeal for assessment year 1985-86. This appeal is directed against the order under Section 263 passed by the Commissioner of Income-tax, Baroda on 8-3-1990. The assessee is a wholly-owned corporation of the Government of Gujarat and is engaged in the business of purchase and sale of minor forest products such as Timru leaves, Mahuda flowers, etc. in the specified forest divisions. The assessee acquired certain rights from the Government of Gujarat for exploitation of minor forest produce from the forests leased to it for which it has to pay royalty to the Government in accordance with the relevant provisions of law relating to payment of such royalty.
(3.) THE Commissioner of Income-tax observed that the balance-sheet of the assessee-company as at the close of the relevant previous year for assessment year 1985-86 disclosed an outstanding liability of royalty amounting to Rs. 25,76,250. After giving a show-cause notice to the assessee and after considering the reply submitted on behalf of the assessee, the learned CIT came to the conclusion that royalty payable by the assessee is in the nature of duty and is hit by Section 43B. THE assessment order made by the ITO without considering the applicability of Section 43B in relation to such outstanding amount of royalty is erroneous and prejudicial to the interest of revenue. THE assessment order was, therefore, set aside with a direction that the same should be made de novo after giving opportunity to the assessee.;


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