9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (12) TMI 282 - AT - Income TaxCharacterization of payment - Addition for External Development Charges - expenditure as covered u/s 43B - payment of EDC to HUDA is subject to TDS @ 2% u/s 194C - HELD THAT - In the present case, from the Rules under which payments have been made by the assessee and the order of the AO, TDS, it is amply clear that it is a charge paid by the developer and builder for obtaining the services from the HUDA authority like sewage, roads, lighting, etc. and in case the assessee does not avail such facility, he is entitled for refund or adjustment of payment. AO himself noted that the payment of EDC to HUDA is subject to TDS @ 2% u/s 194C which clearly characterize the payment as made against the facilities availed by the developer/builder/colonizer which cannot be put in the basket of mandatory or compulsory payment of duty, tax, cess or fee, therefore, section 43B does not stand attracted in the present case to the payment of EDC by the assessee. 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 - 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 and the same is allowable to the assessee. Appeal filed by the assessee is allowed.
Issues Involved:
1. Whether the addition of Rs.1,61,70,056/- for External Development Charges (EDC) under section 43B was justified. 2. The nature of EDC and its classification under tax laws. 3. Applicability of section 43B to EDC payments. Detailed Analysis: 1. Addition of Rs.1,61,70,056/- for External Development Charges (EDC) under section 43B: The assessee contested the addition made by the Assessing Officer (AO) and confirmed by the CIT(A), arguing that EDC should not be covered under section 43B. The assessee's representative highlighted that the EDC paid to Haryana Urban Development Authority (HUDA) is not in the nature of tax, duty, cess, or fee, and thus, should not attract the provisions of section 43B. The representative cited various judgments, including CIT vs. McDowell & Co. Ltd. and Tamil Nadu Minerals Ltd. vs. JCIT, to support their argument. 2. Nature of EDC and its Classification under Tax Laws: The representative argued that EDC is a charge paid to the development authority for obtaining the right to develop specific land and for utilities like sewage and street lighting. It was emphasized that EDC is a user charge and not a statutory levy. The distinction between taxes, duties, cess, and fees under section 43B and EDC was elaborated, showing that EDC is a contractual payment for services provided by HUDA and not a compulsory exaction by the state. The analysis table presented by the assessee compared the characteristics of taxes, duties, cess, and fees with EDC, concluding that EDC does not fall under the categories mentioned in section 43B. 3. Applicability of Section 43B to EDC Payments: The tribunal examined the provisions of section 43B, which mandates the allowance of certain deductions only on actual payment. The assessee argued that EDC, being a contractual payment, does not fall within the ambit of section 43B. The tribunal referred to the decision in CIT vs. McDowell & Co. Ltd., which clarified that terms like 'tax', 'duty', 'cess', or 'fee' in section 43B must denote compulsory exactions authorized by law, not contractual payments. The tribunal also considered the Hon'ble Madras High Court's judgment in Tamil Nadu Minerals Ltd. vs. JCIT, which held that nomination charges paid by the assessee for quarrying rights were not covered under section 43B as they were contractual payments. Conclusion: Upon careful consideration, the tribunal concluded that EDC paid by the assessee to HUDA is a contractual payment for services and not a statutory levy. Therefore, section 43B does not apply to EDC payments. The tribunal held that the AO and CIT(A) erred in treating EDC as falling under section 43B and disallowing the deduction. Consequently, the appeal filed by the assessee was allowed, and the addition of Rs.1,61,70,056/- was deleted. Order: The appeal filed by the assessee is allowed. The order was pronounced in the open court on 29.09.2022.
|
