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C.I.T. versus M/S M.WINES

High Court of Judicature at Allahabad

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C.I.T. v. M/S M.Wines - INCOME TAX REFERENCE No. - 121 of 1992 [2007] RD-AH 15207 (10 September 2007)

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Court No. 2

I.T. R. No. 121 of 1992

Commissioner of Income Tax , Kanpur Vs. Maharashtra Wines, Kanpur.

Hon'ble Prakash Krishna, J.

Hon'ble Bharati Sapru, J.

The Income Tax Appellate Tribunal, Allahabad Bench, Allahabad has referred the following question relevant to the assessment year 1984-85 for opinion of this Court :-

"Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in holding that the vend fee payable by the assessee was not in the nature of tax or duty and was not covered u/s 43-B ?"

The facts of the case are as follows:-

The assessee derives income from purchase and sale of foreign liquor under F.L. 2 licence of M/S K. Distilleries, Nasik. The assessment was made on an income of Rs. 3,74,880/- in the status of A.O.P. The above income included a sum of Rs. 34,180/- having been disallowed under section 43-B for vend fee not paid by the assessee within the accounting period. The assessee filed an appeal before the C.I,T. (A) who, vide his order dated 6-3-1987 confirmed the said disallowance. Aggrieved with the said order, the assessee filed second appeal before the Tribunal. The Tribunal deleted the above addition following its own order in I.T.A. No. 1171 (Alld) of 1987 in the case of Liquor Sales, Kanpur. The Tribunal held the nature of vend fee to be similar to the market cess which was neither a tax nor a duty under any statute. The Tribunal had decided the issue relying on a decision of the Andhra Pradesh High Court in the case of Kakolu Subhba Rao Co. Vs. Union, 173 ITR 708.

Heard Sri A. N. Mahajan, learned Standing Counsel for the department. Section 43-B, as it stood at the relevant point of time, reads as follows:-

"43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-

(a) any sum payable by the assessee by way of tax or duty under any law for the time being in force, or


A bare perusal of Section 43B (a) clearly shows that Section 43B was made applicable in respect of sum payable by the assessee by way of tax or duty under any law for the time being in force. When the vend fee was not included under clause (a) of Section 43B, the Tribunal has rightly held that Section 43B has no application with regard to the vend fee.

It may be stated here that the aforesaid Section was amended subsequently by Finance Act 1988 w.e.f. April, 1989. The case on hand, will, therefore, be governed by unamended Section 43B.

In view of the above, we answer the question in affirmative i.e. in favour of the assessee and against the department.

(Prakash Krishna, J.)

(Bharati Sapru, J.)

Dated: 10-9-2007



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