Law: Income Tax Act, 1961

Section: 37

(a) Income-tax----Business expenditure---Licence fee paid to Government for construction and working of distillery---Is capital expenditure but for which assessee could not have established distillery---Not allowable deduction---Indian Income Tax Act, 1961, S.37. (b) Income-tax----Business expenditure---Surtax---Surtax payable under Companies (Profits) Surtax Act, 1964---Not an allowable deduction---Indian Income Tax Act, 1961, S.37. (c) Income-tax--- ----Deduction---Loss---Loss arising as a result of discarding milk plant---Not allowable deduction---Indian Income Tax Act, 1961, S.28. (d) Income-tax--- ----Deduction---Loss---Loss arising in respect of milk plant discarded and written off---Not allowable deduction---Indian Income Tax Act, 1961, S.45. Section 21 of the Punjab Excise Act, 1914, contemplates imposition of a licence fee for construction and working of a distillery or brewery. Rule 4 of the Punjab Distillery Rules provides that no licence shall be granted unless and until the applicant has deposited a sum of Rs.50,000 in cash as licence fee. Under rule 3, every application for a licence for a distillery shall be in writing in Form No.D-1, under which the applicant applies for a licence to construct and possess a distillery under section 21 of the Punjab Act. Under Form No.D-2 licence is granted to manufacture T country spirit and foreign liquor in the premises specified. Though section 21 of the Punjab Act speaks only of licence for construction and working of distillery or brewery, Form No.D-2 refers to manufacture of the kinds of liquor mentioned therein: Held, that in the context, Form No.D-2 could be understood only in the light of the language used in section 21 read with rules 3 and 4 alongwith Form No.D-1. Hence, the licence fee paid by the assessee is for the purpose of construction and working of distillery. It is only a capital expenditure but for which the assessee could not have established the distillery. He cannot claim the same to be a revenue expenditure as one having been spent for the business. The sum of Rs.50,000 paid to the Government for obtaining a licence for establishing a distillery for the production of Indian-made foreign…

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