Visheshwar Nath Khare, C.J. - (1.) In this reference at the instance of the Commissioner of Income-tax, West Bengal-III, Calcutta, the Income-tax Appellate Tribunal has referred the following three questions of law to this court for its opinion : " (1) Whether, on the facts and in the circumstances of the case and on a correct interpretation of the amendment made by the Finance Act, 1988, to Section 43B(a) of the Income-tax Act, 1961, which has been explained as clarificatory of legislative intention by the Explanatory Notes issued by the Government, the Tribunal was justified in law in not holding that the said amendment will be retrospective in its application ? (2) Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 2(10) of the Bengal Excise Act, 1909, by applying the principles of 'ejusdem generis' the Tribunal was justified in law in holding that the priviledged and specified fee as mentioned in Rules 2 and 6 of the Excise Rules cannot be construed as the fee used in Section 43B(a) of the Income-tax Act, 1961 ? (3) Without prejudice to questions Nos. (1) and (2) above, whether, on the facts and in the circumstances of the case and on a correct interpretation of the income-tax law and the State excise law, the Tribunal was justified in law in holding that the fees payable by the assessee was not excise duty and thereby deleting the addition made in the assessment in this regard ?" When this matter was taken up it was agreed between the parties that questions Nos. (2) and (3) be taken first and in case questions Nos. (2) and (3) are decided in favour of the Revenue, only then question No. 1 may be taken up and answered. Accordingly, we take up questions Nos. (2) and (3) first.
(2.) Briefly stated, the facts leading to this reference are that the assessee is engaged in the business of manufacture and vending of country liquor. Under the Bengal Excise Act, 1909 (hereinafter referred to as the Act), and the Rules framed thereunder, the Government of West Bengal settles the right of manufacture and vend of country liquor in favour of the licensee/ contractor for a consideration. For the assessment year 1984-85, the assessee took a contract/licence for manufacture of country liquor on payment of price/licence fee. It appears that after the assessee took the contract/licence, he challenged the said charge by means of a petition under Article 226 of the Constitution of India in the High Court of Calcutta and obtained an ad interim order by which the State of West Bengal was prohibited from collecting the price/licence fee from the assessee. After obtaining the ad interim order, the assessee in its return debited Rs. 2,78,465 as excise duty to its profit and loss account and further claimed deduction of the said liability. The Assessing Officer disallowed the deduction on the ground that the nature of levy/consideration is duty and, as such, no deduction can be allowed under Section 43B of the Income-tax Act. Aggrieved the assessee filed an appeal to the Commissioner of Income-tax (Appeals) who upheld the order of the Assessing Officer. Thereafter, the assessee filed a second appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal took the view that the price which the assessee is required to pay to the State Government and which has been stayed by the High Court of Calcutta, is not in the nature of duty and, as such, although such price has not been paid to the State Government, the assessee can claim deduction in respect thereof, and, consequently, the appeal was allowed. In pith and substance, questions Nos. (2) and (3) are as to whether the price/consideration/licence fee which the assessee is required to pay to the State Government in favour of the State Government for taking the permission/licence to manufacture country spirit is a tax or duty or cess or fee ?
(3.) Section 43B provides that notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of any sum payable by the assessee by way of tax, duty, cess or fee shall be allowed only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him.;