SUPREME COURT OF INDIA
Commissioner of Incometax
v.
Travancore Sugars and
Chemicals Ltd.
May 7, 2015
JUDGMENT
judgment of court was delivered by
Rohinton Fali Nariman J.-The respondent-assessee is engaged in the
manufacture and sale of foreign liquor and sugar. assessee filed its return
of income for assessment year 1990-91 declaring income of Rs.
15,84,398. assessee had itself shown that vend fee of Rs. 22,87,512 was
disallowable under section 43B of Income-tax Act, 1961 (hereinafter
referred to as "the Act") since it was not actually paid before expiry of the
relevant previous year.
On April 30, 1993, Assessing Officer completed assessment for
year 1990-91 and, inter alia, confirmed disallowance of vend fee.
Against this, assessee preferred appeal before Commissioner of
Income-tax (Appeals), who, by his order dated May 24, 1993, deleted the
disallowance under section 43B and allowed appeal of respondentassessee.
Aggrieved by said order, Revenue preferred appeal before
Income-tax Appellate Tribunal, which confirmed aforesaid order of the
Commissioner (Appeals) by its judgment and order dated April 15, 1998.
Against said order, Revenue preferred reference application before the
Income-tax Appellate Tribunal under section 256(1) of Act, which referred
two questions of law to High Court. In present appeal, we are concerned
with question No. 2 which reads as follows:
"2. Whether, on facts and in circumstances of case, the
Tribunal is right in law in upholding deletion of disallowance under section
43B of Income-tax Act in respect of vend fee of Rs. 22,87,512
outstanding as liability payable to Government of Kerala as on last
day of accounting year?"
Section 43B of Income-tax Act allows certain deductions only to be
on actual payment. Section 43B reads as follows:
"43B. Notwithstanding anything contained in any other provision of this
Act, deduction otherwise allowable under this Act in respect of-
(a) any sum payable by assessee by way of tax, duty, cess or fee, by
whatever name called, under any law for time being in force, or (b) any sum
payable by assessee as employer by way of contribution to any provident
fund or superannuation fund or gratuity fund or any other fund for welfare
of employees, or
(c) any sum referred to in clause (ii) of sub-section (1) of section 36, or
(d) any sum payable by assessee as interest on any loan or borrowing from
any public financial institution or State financial corporation or State
industrial investment corporation, in accordance with terms and conditions
of agreement governing such loan or borrowing, or
(e) any sum payable by assessee as interest on any loan or advances
from scheduled bank in accordance with terms and conditions of the
agreement governing such loan or advances, or
(f) any sum payable by assessee as employer in lieu of any leave
at credit of his employee;
shall be allowed (irrespective of previous year in which liability
to pay such sum was incurred by assessee according to method of
accounting regularly employed by him) only in computing income referred
to in section 28 of that previous year in which such sum is actually paid by
him:"
reading of section after it was substituted by Finance Act, 1988,
with effect from April 1, 1989, shows that sub-clause (a) in section 43B has
been considerably widened by amendment by addition of words "by
whatever name called". It is clear, therefore, that to attract this section any sum
that is payable whether it is called tax, duty, cess or fee or called by some other
name, becomes deduction allowable under said section provided that in
previous year, relevant to assessment year, such sum should be actually
paid by assessee.
Shri Arijit Prasad, learned counsel appearing on behalf of appellant,
has submitted before us that judgment under appeal has missed purport
of 1988 Finance Act amendment to Income-tax Act. He also claimed
that whether particular vend fee is called "privilege" in law, thanks to certain
judgments of this court, makes no difference in view of amendment, and
whether it is fee stricto sensu as understood in legislative lists in the
Seventh Schedule to Constitution of India or it is called by some other name
would not make any difference. Further, he argued before us that reliance
placed on judgment of Karnataka High Court reported in CIT v. Sri Balaji
and Co. reported in [2000] 246 ITR 750 (Karn) in year 2000 was also
misplaced inasmuch as Karnataka High Court, in holding that kist or rentals
paid to Government in respect of vending, toddy/arracks is not duty, tax,
cess or fee so held only because this case pertains to period prior to the
amendment made with effect from April 1, 1989.
Shri C. N. Sreekumar, learned counsel on behalf of respondent,
referred us to counter-affidavit filed in this court and to annexure to the
said counter-affidavit. His argument was that it is clear that socalled vend
fee in present case is nothing but consensual arrangement by which
ultimately machinery and equipment used by sugar mills which were very old
and which require urgent repair/replacement could be so repaired or replaced.
According to him, aforesaid vend fee not being compulsory exaction by
State, would not, therefore, fall within any of expressions used in section
43B(a) of Act.
Having heard learned counsel for parties, we think there is force in
submission made by Shri Arijit Prasad on behalf of Revenue. first
and foremost, he is correct in saying that impugned judgment does not refer
to amendment made in section 43B with effect from April 1, 1989, at all.
assessment year with which we are involved on facts in present case is
1990-91 which would clearly attract amendment so made. Secondly, he is
also correct in stating that Karnataka High Court judgment referred to supra,
decided question arising under section 43B in respect of assessment years
1984-85, i.e., it was judgment relating to assessment year prior to the
amendment made on April 1, 1989. It was in these circumstances that the
Karnataka High Court held:
"The provisions of section 17 of Karnataka Excise Act, 1965, have
referred to power to grant lease of right to manufacture. Section 24 has
conferred additional power on State Government to accept payment of
sum or levy such licence fee or privilege fee as may be prescribed, in
consideration of grant of lease or licence or both, by or under this Act. This
power is in addition to any excise duty or countervailing duty leviable under
sections 22 and 23. If Legislature has used specific language then it cannot
be stretched to include certain sums which are not in nature of payment
mentioned by Legislature. Payment of lease money/rental may be a
statutory liability but however any statutory liability does not come within the
purview of section 43B. It is only that statutory liability which is in the
nature of tax, duty, cess or fee to which provisions of section 43B are
attracted. Since kist/rental could not be considered to be falling under either
of items, provisions of section 43B cannot be attracted and as such we
are of view that Tribunal was justified in law in holding that kist
amount payable Page 761 of 246 ITR. to Government by assessee could
not be brought within purview of provisions of section 43B of the
Income-tax Act, 1961. It is different matter that licensees are not paying
rent in time for which it is only Legislature which could intervene and
not courts."
Shri Arijit Prasad also referred us to Notes on clauses which preceded
1989 amendment which reads as follows:
"21.2 words'tax' and'duty' have been subject matter of judicial
interpretation and there is controversy as to whether they cover statutory
levies like cess, fees, etc. Some appellate authorities have held that such cess
or fees cannot be covered by expressions 'tax' or'duty'. Such an
interpretation is against legislative intent and, therefore, by way of
clarification, amendment has been carried out to provide that cess or fees by
whatever name called, which have been imposed by any statutory authority,
including local authority, will be allowed as deduction only if these are
actually paid."
On reading of document on which Shri C. N. Sreekumar has placed
reliance, namely, Government of Kerala order dated April 28, 1988, what
becomes clear is that Government proposed to impose and then imposed a
levy on three sugar mills by way of collecting of vend fee of Rs. 0.50 paisa
per bulk litre of arrack sold by them which would go into fund which would
then be used for repair/replacement of old machinery and equipment in
these three mills. This document shows that vend fee collected from the
three mills is, in fact, fee in classic sense of term as used in
Commissioner, Hindu Religious Endowments v. Sri Lakshmindra Thirtha
Swamiar of Sri Shirur Mutt reported in [1954] SCR 1005. It is clear, on a
reading of this document, that State compulsorily takes from three mills,
vend fee for purpose of conferring special benefit on said three mills,
viz., repair and replacement of existing machinery and equipment.
On facts in present case, it is clear that amendment made to section
43B is attracted. Even if vend fee that is paid by respondent to State
does not directly fall within expression "fee" contained in section 43B(a), it
would be "fee" by "whatever name called", that is even if vend fee is
called "privilege" as has been held by High Court in judgment under
appeal. This being case, we find that question No. 2 which was answered in
favour of assessee and against Revenue by High Court was not
answered correctly.
Page 165 of 176 ITR (St.). We, therefore, set aside aforesaid judgment
and allow present appeal in favour of Revenue. In case respondent
has actually paid aforesaid fee in previous year relevant to some other
assessment year, he will be entitled to claim benefit of section 43B for that
particular assessment year in accordance with law. appeal stands disposed
of in aforesaid terms.
* * * Commissioner of Income-tax v. Travancore Sugars and Chemicals Ltd