Royalty Payments

Court :
High Court

Brief :
Business disallowance - Certain deductions to be allowed only on actual payment

Citation :

Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment - Assessment year 1985-86 - Whether royalty is to be treated a tax and, therefore, for purposes of clause (a) of section 43B, it would be inclusive in term ‘tax’ even if it is called by any other name - Held, yes - Assessee claimed deduction of certain sum towards royalty paid in assessment year 1985-86 - ITO observed that assessee would not be entitled to seek any benefit flowing from section 43B as liability was not in relation to assessment year 1985-86 but pertained to assessment years 1981-82 and 1982-83 - He accordingly, disallowed said payment of royalty - Whether though liability to pay royalty was in relation to assessment years 1981-82 and 1982-83, yet liability was finalised in assessment year 1985-86, and, therefore, section 43B would apply with full force if said royalty was paid in said assessment year - Held, yes