TMI Blog2022 (12) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... schedule viz., before filing the return of income u/s 139(1) of the Act will not decide the allowability or otherwise of such payment u/s 143B - Allowability of such payment would then depend upon the method of accounting followed by the assessee and if the assessee has made provision for its payment in its books of account and has claimed it as accrued liability in the relevant financial period, then, he is entitled to get the deduction in the relevant assessment year itself without any bar or application of section 43B. We conclude that the impugned payment made by the assessee towards EDC under HDRUA Rules does not fall within the ambit of duty, tax, cess or fee. The impugned payment has been made by the assessee for acquiring the facilities on the land allotted to it by HUDA, which is not in the nature of duty, tax, cess or fee. Provisions of section 43B is not applicable to the said payment. We are incline to hold that the AO was not correct in characterizing the payment falling within the ambit of section 43B and the CIT(A) was also not justified in confirming the same. The impugned payment made by the assessee towards EDC does not attract the provisions of section 43B an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the EDC paid by the appellant to Haryana Urban Development Authority (HUDA) are not in the nature of any tax, duty, cess or fee. Therefore, the authorities below have grossly erred in holding that such contractual payment fell within the ambit of section 43B of the Act. The ld. AR submitted that by applying the principles of ejusdem generis , the term cess and fees should be in the nature of tax to be covered under section 43B of the Act. The ld. Counsel also drew our attention to the written synopsis of the assessee elaborating the distinction between the tax, cess, duty and fees covered under section 43B of the Act with the EDC charges payable by the assessee to HUDA. The relevant part of the synopsis reads as follows:- Taxes, Duty, Cess and Fees according to Section 43B of the Act External Development Charges (EDC) Taxes are compulsory exaction of money by public authority for public purpose enforceable by law. EDC are charges payable to the development authority for obtaining the right to develop the specific land acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'taxation' to which expression 'Tax', 'Duty', 'Cess' or 'Fee' as a group of its specie belong. In other words, compulsory exaction in the exercise of State's power of taxation, where levy and collection is duly authorised by law as distinct from amount chargeable in pursuance of a contract. The relevant extract of the judgement is as under: 10. It would be pertinent to note that the expression now used in Section 43B (i)(a) is Tax, Duty, Cess or fee or by whatever name called . It denotes that items enumerated constitute species of the same genus and the expression 'by whatever name called' which follows preceding words 'Tax','Duty', 'Cess' or 'fee' has been used ejusdem generis to confine the application of the provisions not on the basis of mere nomenclatures, but notwithstanding name, they must fall within the genus 'taxation' to which expression 'Tax', 'Duty', 'Cess' or 'Fee' as a group of its specie belong vis. compulsory exaction in the exercise of State's power of taxation where levy and collection is duly authorised by law as distinct from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) The term 'Tax' under Article 265 read with Article 366(28) includes imposts of every kind viz., tax, duty, cess or fees. (iv) As an incident of sovereignty and in the nature of compulsory exaction, a liability founded on principle of contract cannot be a tax' in its technical sense as an impost, general, local or special. Accordingly, in the instant case, EDC has been paid as the price or consideration by the appellant for obtaining exclusive privilege/ right from HUD A and therefore does not fall in the category of 'statutory dues' or within the genus 'taxation'. Consequently, payment of EDC would not attract provision of 43B of the Act. The said judgement of Hon'ble Supreme Court, as supra has been relied upon by the Hon'ble Madras High Court in the case of Tamil Nadu Minerals Ltd. Vs. TCIT [2019] 107 taxmann.com 214 (Madras)held that nomination charges paid by assessee, engaged in quarrying granite blocks from mines, to State Government for allotment of land for quarrying of granite, could not be equated with terms tax, duty cess or fees' under section 43B(a). Therefore, the outstanding amount of EDC is dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first appellate as well as assessment order and submitted that the expenditure of EDC claimed by the appellant without making actual payment on or before filing the income-tax return is not allowable under the provisions of section 43B and, therefore, the disallowance made by the AO was rightly confirmed by the ld.CIT(A). He further submitted that the EDC is a statutory charge payable by the developer/colonizer as per the provisions of HDRUA Rules which is covered under the provisions of section 43B of the Act. Therefore, the same has to be allowed only on the basis of the actual payment made by the assessee before filing the income-tax return on or before the due date provided u/s 139 of the Act. 6. Placing a rejoinder to the above, the ld. AR submitted that no TDS is required to be deducted on payment of any duty, tax, cess or feess where as the AO in assessee s own case in the TDS order dated 30.03.2021 (supra) passed u/s 201(1) of the Act, in para 5.4, has noted that the EDC payment made by the builder to HUDA is under a service contract and, therefore, a private builder is liable to deduct tax at source on such payment under the provisions of section 194 of the Act whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f EDWs. Thus HUDA is rendering a service to colonizers for which EDC is paid and the work carried out is civil work in nature for providing amenities. The work is for creating and maintaining of infrastructure in order to make it suitable for urban habitation. EDWs enhance the value of property and the value addition fetch higher price prospective customers. Thus, EDC payment made by the builders to HUDA is covered under service contract. Therefore, a private builder is liable to deduct tax at source on such payments under the provisions of section 194C of Income Tax Act. Hence, EDC ought to be subjected to TDS by payers @) 2% u/s194C of the Income Tax Act, 1961. 9. Furthermore, the Hon ble Supreme Court in the case of CIT vs. McDowell Co. (supra) explained the rule of ejusdem generis and also considered all the judgement relevant to this issue and, thereafter, held that the bottling fees for acquiring the right of bottling of IMFL, which is determined under the Excise Act and Rule, 1969 payable by the assessee as consideration for acquiring exclusive privilege which is neither fees nor tax, but, the consideration for grant of approval by the Government as terms of contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 265 which uses only expression that no 'tax' shall be levied and collected except authorized by law. 14. It in its elementary meaning coveys that to support a tax legislative action is essential, it cannot be levied and collected in the absence of any legislative sanction by exercise of executive power of State under Article 73 by the Union or Article 162 by the State. Under Article 366(28) Taxation has been defined to include the imposition of any tax or impost whether general or local or special and tax shall be construed accordingly. Impost means compulsory levy. 15. The well known and well settled characteristic of 'Tax' in its wider sense includes all imposts. Imposts in the context have following characteristics: (i) The power to tax is an incident of sovereignty. (ii) 'Law' in the context of Article 265 means an Act of legislature and cannot comprise an executive order or rule without express statutory authority. (iii) The term 'Tax' under Article 265 read with Article 366(28) includes imposts of every kind viz., tax, duty, cess or fees. (iv) As an incident of sovereignty and in the nature of compul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by the Assessee to the State Government on 09.12.2007 even in the present Assessment Year 2004- 05 on the basis of accrual of liability to pay the same arising for this relevant previous year only. The view that it is a contractual payment is further fortified by the enabling powers as provided under Clause-2 of the Annexure to the Lease Deed in question and the State Government was at liberty to fix the nomination charges or not to impose the same altogether. Therefore the said prescription of nomination charges cannot be held to be a compulsorily impost falling within the four corners of Section 43B of the Act. The State Government not only has the power to impose the same but also to waive, reduce or modify the same as well, depending upon the quantum of commercial exploitation and other relevant circumstances. It could also be treated as 'Royalty' payable by the Assessee TAMIN, to the State for parting with its exclusive rights by giving Leasehold right to the Assessee. Royalty is not a tax, is a settled legal position by the Constitution Bench decision. 42.The series of Government Orders produced before us also indicates that initially the State Government pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basket of mandatory or compulsory payment of duty, tax, cess or fee, therefore, section 43B of the Act does not stand attracted in the present case to the payment of EDC by the assessee. 12. In view of the foregoing, once we come to the conclusion that section 43B of the Act does not apply to the payment of EDC, the question of applying the rigor of payment within the time schedule viz., before filing the return of income u/s 139(1) of the Act will not decide the allowability or otherwise of such payment u/s 143B of the Act. It is pertinent to note that the allowability of such payment would then depend upon the method of accounting followed by the assessee and if the assessee has made provision for its payment in its books of account and has claimed it as accrued liability in the relevant financial period, then, he is entitled to get the deduction in the relevant assessment year itself without any bar or application of section 43B of the Act. 13. In view of the foregoing, we conclude that the impugned payment made by the assessee towards EDC under HDRUA Rules does not fall within the ambit of duty, tax, cess or fee. Per contra, the impugned payment has been made by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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