- (1.) THIS IT appeal has been admitted by this Court on 19th Jan., 2000 and following substantial questions of law have been framed by this Court arising out of this appeal : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that provisions of s. 43B of the Act are not applicable to outstanding liability on account of land tax and thereby deleting the disallowance of Rs. 8,21,088 made under s. 43B of the Act? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that receipt of Rs. 1,00,000 from M/s J.K. White Cement Works is capital receipt and not taxable in the hands of assessee, either as capital gain or as casual income under s. 10(3) of the Act?"
(2.) ABOUT question No. 1, it is now common ground that Rajasthan Land Tax Act, under which liability was created has been held to be ultra vires legislative competence of State legislature and, therefore, invalid. However, the declaration of levy of tax to be invalid was to operate prospectively from the date of judgment of Supreme Court in Federation of Mining Associations of Rajasthan vs. State of Rajasthan & Ors. and other connected matters decided on 30th Aug., 19991 [vide 1992 Supp. (2) SCC 241]. Question No. 1 relates to disallowance of Rs. 8,21,088 claimed by the assessee as outstanding liability on account of land tax under the Rajasthan Land Tax Act. It has been disallowed under s. 43B of the Act on the ground that it represents the amount of tax not actually paid when it became payable and was still outstanding as on the end of the previous year. The assessee contended that since Rajasthan land tax has been declared to be ultra vires by the Honourable Supreme Court, it cannot be termed as tax or duty within the meaning of s. 43B but should be considered as any other expenses incurred wholly and exclusively for the purpose of business and liable to be deducted on the basis of mercantile method of accounting regularly maintained by the assessee, when the liability was incurred. It does raise an interesting question but in view of submission made by the assessee, we need not go into details of this issue. The learned counsel for the respondent-assessee states that large portion of such amount in question has been paid from time to time as and when amount has been paid by it, said payment has been claimed and allowed as deduction against income of the relevant subsequent assessment years. Only Rs. 41,388 was paid during the previous year relevant to assessment year in question. Deduction of so much amount actually paid by the assessee during the relevant time cannot be disallowed even under s. 43B. The same has to be treated as eligible deduction for the year in question, in any event. Apart from the above statement that amount other than Rs. 41,388 has been availed as deduction in subsequent years and the claim to deduction of the same amount cannot be allowed twice, we find that the Supreme Court in India Cement vs. State of Tamil Nadu 1990 (1) SCC 12 has held the royalty to be a tax, and for that reason has further held in Gorelal Dubey vs. CIT (2000) 163 CTR (SC) 369 : (2001) 248 ITR 3 (SC) that to a claim for deduction of royalty, s. 43B is attracted. Therefore, even if the liability, which has failed as land tax, but has not been set aside and sustained, shall bear the character of additional royalty. In that event also as per the ratio of Gorelal's case (supra), s. 43B shall apply to the claim of the assessee.
(3.) ACCORDINGLY, we set aside the order of the Tribunal as far as it relates to the allowing deduction of Rs. 8,21,088 is concerned, by holding it to be beyond the scope of s. 43B and direct to verify the facts about actual payment of Rs. 41,388 out of the aforesaid claim. On verification deduction to the extent of Rs. 41,388 may be sustained. The second question is whether the receipt of Rs. 1,00,000 by the assessee-respondent from M/s J.K. White Cement Works as a compensation for the assessee agreeing to surrender part of his limestone lease area so that the same may be allotted to M/s J.K. White Cement Works for its white cement plant, is a casual receipt liable to be taxed as income or is a capital receipt subject to capital gain. The facts which are not in dispute in this regard are that the assessee was holding a large area measuring 15 sq. kms. under mining lease for limestone. Request was made by M/s J.K. White Cement Works that the assessee should surrender 4 sq. kms, part of the total lease area, to enable M/s J.K. White Cement Works to obtain lease of surrendered area in its favour from the State Government. In pursuance of which an agreement to that effect was agreed to between the assessee and M/s J.K. White Cement Works which was duly approved by State Government. In consideration of such agreement, the assessee received Rs. 1,00,000 and he surrendered 4 sq. kms. of lease area to be allotted to M/s J.K. White Cement Works. The State Government ultimately granted lease of said area in favour of M/s J.K. White Cement Works after the same was surrendered by the assessee. ;