TMI Blog1992 (5) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 43B of the Income Tax Act, 1961. Therefore, it was prayed that the order of the C.I.T.(A) should be vacated and that of the Assessing Officer restored. 3. The assessee is a registered firm which is carrying on business as commission agent of agricultural produce. It follows mercantile method of accounting and the accounting year followed is samvat year. For the purpose of carrying on business, the assessee has to pay Market Cess to the Market Yard Committee of Pune, weighing charges under the head Tolai charges etc. The assessee has shown, inter alia, market cess liability of Rs. 34,071 for the assessment year 1985-86, whereas for the assessment year 1986-87 a sum of Rs. 39,857 was debited to the profit and loss account, but it was not actually paid to the Market Yard Committee. According to the assessee, though the market cess has been separately collected from the customers none the less it did not form part of income of the assessee. Therefore it was contended that the market cess collected by the assessee was not duty in terms of section 43B of the Income Tax Act, 1961 and consequentially does not fall within the mischief of section 43B. These contentions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at prevailed as to whether market cess or fee could be considered as tax or duty was statutorily cleared by the Finance Act, 1988 which has inserted the words " cess or fee " under clause (a) of section 43B of the Income Tax Act, 1961 which is effective from 1-4-1989. Therefore, he urged that the market cess or fee would attract the provisions of section 43B(a) for the assessment year 1989-90 onwards and not earlier as in the case of the assessee. 7. We have duly considered the submissions of the parties and the decisions cited. In the case of Srikakollu Subba Rao Co. the main challenge was whether the provisions of section 43B was violative of Articles 14 and 19(1)(g) of the Constitution, i.e. whether it is discriminatory or imposes restriction on the right of carrying on business activities. On both these questions, the Andhra Pradesh High Court upheld the validity and rejected the contentions of the petitioner. However, the point in issue, namely, market cess, came up for consideration and the contention of the petitioner was that market cess was not in the nature of either tax or duty and therefore, could not be disallowed on the ground of non-payment under section 43B. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads, hospitals, means of communication, water supply, sanitation facilities and for the welfare of agricultural labour or for any other approved scheme in rural areas. It was held by the Supreme Court that the Fund created under the said Act was a mere cloak to cover the true character of the levy because when the amount was spent from the Fund the interest of the dealers was not at all kept in view even generally. There was no other restriction imposed on the manner in which the Fund could be spent. Therefore, it was held that the cess, partook the character of a part of the common burden which had to be levied and collected only as a tax. The Supreme Court held that in such a situation, it was difficult to hold that there existed any correlation between the amount paid by way of cess under the Act and the services rendered to the person from whom it was collected. Therefore, it concluded that the levy was not a fee but was a tax not leviable by the State Legislature and as a consequence the entire Act was unconstitutional and the levy of the cess was liable to be quashed. 10. We shall now consider the relevant provisions of the Maharashtra Agricultural Produce Marketing (Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e together with other items with which we are not concerned shall form part of a fund to be called the Market Fund. Sub-section (1) of section 37 lays down the purposes for which the market fund may be expended. The important purposes are (a) the acquisition of a site or sites for the market ; (b) maintenance, development and improvement of the market ; (c) construction of, and repairs to, buildings necessary for the purposes of such market and for the health, convenience and safety of persons using it ; (d) the provision and maintenance of standard weights and measures ; (h) the collection and dissemination of information regarding matters relating to crop statistics and marketing in respect of the agricultural produce notified under section 4 ; (i) propaganda in favour of agricultural improvement and orderly marketing ; (j) giving grant or donation to any institution or body conducting any educational or welfare activities for the benefit of agriculturists in the market area, subject to the condition that the amount of such grant or donation does not exceed in the aggregate ten per cent of the net amount remaining after deducting the expenditure from the revenues of the year imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Om Prakash Agarwal is applicable so far as the essential characteristics of the levy collected by the Market Committee vis-a-vis the services rendered by it and the utilisation of the funds collected by it. We have already extracted the relevant services rendered by the Market Committee and the purposes for which the fund is utilised. After carefully considering all the relevant provisions of the Act extracted above, we are of the considered opinion that the levy made by the Market Committee is in the nature of fee collected for the innumerable services rendered for the development of market area in which the transactions are carried on. There is, therefore, quid pro quo relationship between the levy and the services rendered to the agriculturists which are enumerated above. Even the utilisation of market fund is for the betterment of the marketing areas. Even the market fund consists of sums realised by way of penalty, or loans raised by the Committee, all grants, loans or contributions made by the State Government to the Committee etc. and the contribution not exceeding 10 per cent made to State Agricultural Marketing Board also goes to improve and develop the marketing areas an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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