Sabyasachi Mukharji, J. - (1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court: " Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the royalty amounting to Rs. 23,330 was admissible as a business expenditure for the assessment year 1965-66?"
(2.) In order to appreciate the question, it is necessary to refer to certain facts. We are concerned in this reference with the assessment year 1965-66, for which the previous year ended on March 31, 1965. The assessee is engaged in raising of coal from coal mines. It claimed royalty of Rs. 28,725 as payable to the Govt. of West Bengal. The ITO disallowed the claim on the ground that it related to the earlier years. Aggrieved by the said order of the ITO, the assessee preferred an appeal to the AAC. It appears that the Government had raised royalty to 21/2 per cent. with retrospective effect which the assessee was required to pay. That was done by a notification dated December 29, 1961. The said notification is to the following effect: " New Delhi--the 29th December, 1961. S.O. No. 3094 : In exercise of the powers conferred by Section 30A of the Mines and Minerals (Regulation and Development) Act, 1957 (67 of 1957), the Central Government hereby directs that the provision of subsection (1) of Section 9 of the said Act shall apply, with immediate effect, to or in relation to mining leases in respect of coal, granted before the 25th day of October, 1949, subject to the modification that the lessee shall pay royalty at the rate specified in any agreement between the lessee and lessor or at 21/2 per cent. of f.o.r., price, whichever is higher, in lieu of the rate of royalty specified in respect of coal in the Second Schedule to the said Act."
(3.) The AAC, after considering the said notification as well as the circular dated July, 1964, issued by the Mining Federation was of the opinion that the liability had not accrued in the year under reference. He, therefore, confirmed the order of the ITO. There was a further appeal before the Tribunal. The claim was restricted to Rs. 22,330 and it was urged that the claim for payment of royalty was settled in 1964 and only after the Mining Federation had issued the circular to the colliery owners. The Tribunal, after considering the facts and circumstances of the case, held that the assessee was within its right to make a claim within the year 1964 for previous years and, therefore, allowed the claim of the assessee. Upon this, the question, as indicated before, has been referred to this court.;