SC: No fundamental right to do trade in intoxicants

The Supreme Court has ruled that nobody has the fundamental right to conduct trade or business in intoxicants and the state has the power to impose a complete ban these activities such as its manufacture, storage, export, import, sale and possession in all their manifestations.

Dismissing the appeals of Commissioner of Income tax, Udaipur, Rajasthan, a bench comprising Justices Arijit Pasayat and Mukundakam Sharma, held that providing bank guarantee des not amount to actual payment of tax, fee, duty or cess and therefore the assessee McDowell’s and Company Ltd cannot claim their deduction under Section 43B of the Income Tax Act.

The apex court in its judgment said ‘there is no fundamental right to do trade and business in intoxicants. The state under its regulatory powers has the right to prohibit absolutely every form of activity in relation to intoxicants, its manufacture, storage, export, import, sale and possession in all their manifestations.

These rights are vested in the state.’ The court further noted ‘the furnishing of bank guarantee cannot be equated with actual payment which requires that money must flow from the assessee to the public exchequer as required under Section 43B ‘By no stretch of imagination, it can be said that furnishing of bank guarantee is actual payment of tax or duty in cash. The bank guarantee is nothing but a guarantee for payment on some happening and that cannot be the actual payment as required under Section 43B of Act for Allowance, as deduction in the computation of profit,’ it added.

The court held that depreciation cannot be allowed on research and development machinery if they are lying idle and have not been used during the year of assessment.

The Rajasthan High Court had ruled that deductions allowed by the Income Tax Appellate Tribunal that unpaid amount of bottling fee has on furnishing of the bank guarantee has to be treated as actual payment is incorrect.

The Income Tax Department came in appeal against the High Court judgment and the Supreme Court dismissed its against McDowell’s