TMI Blog2001 (5) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act, 1988, w.e.f.1st April, 1989. Accordingly, it was submitted that the CIT(A) erred in holding at page 3 para 2.3 of the impugned order as under: "I have considered the submissions made before me as well as the observation of the AO in the assessment order. I am afraid the AO has missed the point altogether. The licence agreement entered into between NDMC and the appellant company is in the nature of a lease or tenancy agreement and licence fee of Rs. 2.68 crores has been charged in the same manner as a landlord would from his tenant with the actual difference that s. 52 of the Indian Easement Act comes into operation in view of the licence agreement. Just because the word fee is mentioned in s. 43B, the provisions of s. 43B cannot be invoked in the case of the appellant and licence fee cannot be incorporated as a part of the fee prescribed in this section. The disallowance under s. 43B is not called for and is deleted as the Appellant maintains mercantile system of accounting and the liability of licence fee is duly reflected in its accounts." 3.2 It was also submitted that the mode of recovery was as per cl. 54 of the agreement between the assessee and the ND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainability of the writ petition it was held to be a contractual obligation involving no public element and that this was strictly in the realm of contract. 4.4. On the applicability of the decision of the Madhya Pradesh High Court in the case of CIT vs. Gorelal Dubey it was submitted that their Lordships of the M.P. High Court had followed the decision of the apex Court in the case of India Cement vs. CIT (1991) 188 ITR 690 (SC). The issue being different as such, it does not advance the case of the Revenue. 4.5. regarding the recovery clause, out attention was invited to the s. 98(a) of the Punjab Land Revenue Act, 1887, which reads as under: "Other sums recoverable as arrears of land revenue In addition to any sums recoverable as arrears of land revenue under this Act or any other enactment for the time being in force, the following sums may be also recovered, namely: (a) Fees, fines, costs and other charges, including the village officers' cess payable under this Act; Thus, cl. 54 was merely a mode of recovery and did not make the obligation a statutory obligation. 5.1 We have heard the rival submissions and perused the material placed on our files. The decision cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and by MCD from the assessee in lieu of rent of land revenue which otherwise could be earned on the said plot by MCD. He further observed that this fact is clear from cl. 54 of the said agreement which reads as under: "All arrears of licence fee and other payments due in respect of the premises hereby demised shall be recoverable in the same manner as arrear of land revenue under the provisions of the Punjab Land Revenue Act, 1887 (XVII of 1887), and any amending Act for the time being in force." Thus, he came to the conclusion that the licence fee charged from the assessee is a statutory liability. He was also of the belief that: "Although the nomenclature for the said charge may be "licence fee" but it was clear that the MCD was recovering it as land revenue from the said plot of land leased out to the assessee". Thus, he observed: "It makes no difference as far as s. 43B is concerned whether the said recovery is termed as licence fee or leased rent or land revenue." 5.4. Aggrieved by this, the assessee went in appeal before the CIT(A) contending that the licence fee is payable in consideration of the licensor granting to the licencee the licence in respect of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtisement and the offer of Pure Drinks Ltd. being the highest bid was accepted. The fact that thereafter Pure Drinks was allowed to float a Public Limited Company namely, the assessee and that a dispute arose between the NDMC and the assessee-company over the rate of payment of licence fee and that NDMC issued a show-cause notice to the assessee calling upon it to make payment of arrears of licence fee and in the absence of which why the allotment/licence of the hotel site in question might not be withdrawn besides disconnection of electricity supply and taking action under ss. 5, 7, of the Public Premises Act, 1971 (Eviction of Unauthorised Occupants) is not disputed before us and in fact is relied upon before us is as an undisputed fact. 5.7 The same is being referred to only for the purpose of stating that on receiving the aforesaid notice the petitioner invoked the arbitration clause and referred the dispute to arbitration by Lt. Governor, Delhi, CWP No. 356/89 challenging the show-cause notice of NDMC before the Delhi High Court whereby disconnection of electric supply was threatened. Apart from this Suit No. 1193 of 1990 under s. 20 of the Indian Arbitration Act, 1940, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1193/90 under s. 20 of the Indian Arbitration Act, 1940, for appointment of arbitrator have held it to be so. 5.9 Thus, in this background it would be pertinent to examine the case sought to made out by the Revenue that the nomenclature of 'fee' is not relevant as the amount is of the nature of 'tax'. For this, learned Departmental Representative has placed reliance on CIT vs. Gorelal Dubey wherein it has been held that royalty is tax and the High Court held therein that the Tribunal was not justified in holding that the provisions of s. 43B were not applicable to the unpaid liability towards royalty payment. A perusal of the said judgment shows that their lordships of the Madhya Pradash High Court therein relied upon the case of India Cement vs. State ofTamil Nadu. Brief relevant facts of the case before their lordships of the Madhya Pradash High Court may be brought out hereunder to elucidate the issue before them. The assessee in its return for asst. yr. 1984-85 had among others claimed a deduction of Rs. 76,956 towards its liability for payment of royalty. In view of the provisions of s. 43B of the IT Act, 1961, same was disallowed by the AO. The appeal of the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State legislature. The case of the Revenue is clearly out on this count by the decisions of the Delhi High Court in the CWP No. 7163 of 1999 filed by the assessee and dismissed by the Delhi High Court on the reasoning that the writ is not maintainable as the dispute is in the realm of a contractual obligation. In the case of CIT vs. Gorelal Dubey, it is pertinent to note that the 'royalty' was payable under a specific statute whereas in the case before us, the sum payable is not governed by any statute but has been arrived at by way of an across the table negotiations between the two contracting parties. Regarding the fact that the mode of recovery if governed by the Punjab Land Revenue Act, we are of the opinion that it is a recovery procedure prescribing the mode of recovery in the event, the amount agreed upon is not paid and is not a levying clause. As such, the amount agreed upon to be paid by the assessee to the NDMC is on the basis of their negotiations and is not levied by any Act of State. 5.12. Accordingly, in the aforementioned facts and circumstances and position of law, the conclusion arrived at by the learned CIT(A) in the impugned order is upheld by us on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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