1991 (12) TMI 132 - AT - Income Tax

Summary

Issues Involved:
1. Nature of Vend Fee and Additional Vend Fee (whether they are tax or fee).
2. Applicability of Section 43B of the Income-tax Act, 1961.
3. Retrospective application of the 1988 amendment to Section 43B.
4. Entitlement to revenue deduction under Section 43B.

Issue-wise Detailed Analysis:

1. Nature of Vend Fee and Additional Vend Fee:
The primary issue was whether the Vend Fee and Additional Vend Fee collected under the Tamil Nadu Prohibition Act, 1937, are considered taxes or fees. The assessee argued that these fees are levied in consideration of the exclusive rights granted to them by the Government of Tamil Nadu and are not in the nature of tax or duty. The Assessing Officer, however, opined that these fees partook the characteristics of a tax, citing various legal precedents and the statutory nature of the levy. The Tribunal concluded that the Vend Fee and Additional Vend Fee are the price or consideration charged by the State Government for parting with its exclusive rights and privileges, and thus, do not constitute a tax or fee within the meaning of Entry 66 of the State List.

2. Applicability of Section 43B:
The Assessing Officer invoked Section 43B of the Income-tax Act, 1961, to disallow the assessee's claim for revenue deduction in respect of the provisions made towards the Vend Fee and Additional Vend Fee. The assessee contended that Section 43B did not apply to fees at the relevant time, and even if it did, the fees in question were not taxes or duties. The Tribunal agreed with the assessee, stating that Section 43B, as it stood prior to the 1988 amendment, governed taxes and duties properly so-called, and since the fees in question were neither taxes nor duties, the provisions of Section 43B were not applicable.

3. Retrospective Application of the 1988 Amendment to Section 43B:
The assessee argued that the 1988 amendment to Section 43B, which included "cess or fee," was not retroactive and applied only from the assessment year 1989-90 onwards. The Assessing Officer considered the amendment to be clarificatory and therefore retroactive. The Tribunal held that even if the amendment were considered retroactive, it would not affect the case, as the fees in question were not fees in the strict sense nor cess. Therefore, the 1988 amendment did not apply to the assessment year 1987-88.

4. Entitlement to Revenue Deduction:
The assessee claimed that they were entitled to revenue deduction under the first proviso to Section 43B, as they had remitted the Additional Vend Fee to the Government by the due date for filing the return of income. The Tribunal concluded that since the Vend Fee and Additional Vend Fee were not taxes or duties, the provisions of Section 43B did not apply, and the assessee was entitled to revenue deduction for the entire sum of Rs. 9,83,30,732.

Conclusion:
The Tribunal set aside the decisions of the lower authorities, concluding that the Vend Fee and Additional Vend Fee are the price paid by the assessee to the State Government for exclusive rights and privileges and do not constitute taxes or fees. Consequently, Section 43B of the Income-tax Act, 1961, was not applicable, and the assessee was entitled to revenue deduction for the entire amount claimed. The appeal by the assessee was allowed.