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TMI Blog2022 (12) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... xternal Development Charges (EDC) alleging that the expenditure is covered under section 43B, ignoring the submission made by the appellant company, which is arbitrary, baseless, unjustified and bad in law. The ld. Assessee's representative reiterated its written submissions and placed reliance on various judgements including the judgement of the Hon'ble Supreme Court in the case of CIT vs. McDowell & Co. Ltd., 180 Taxmann 514 (SC) and the judgement of the Hon'ble Madras High Court in the case of Tamil Nadu Minerals Ltd. vs. JCIT (2019) 107 taxmann.com 214 (Madras) and submitted that the auditor on the basis of his own understanding, treated the EDC forming part of the items mentioned in Clause 4 (ix) (a) of CARO-2003. He further submitted that as per CARO-2003, there is a liability on the part of the auditor to report certain details in the CARO report on the basis of the audit conducted by him. The ld. AR also submitted that the auditor has also provided a representation to the appellant stating that the provisions of section 43B of the Act is not applicable to EDC paid by the company and, hence, any non-payment of EDC will not attract the provisions of section 43B of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n:- i. The 'Tax', 'Duty', 'Cess' or 'Fee' constituting a class denote various kinds of imposts by the State in its sovereign power of taxation to raise revenue for the State. The expression fee' is not used in the State Excise laws or rules in the technical sense of the expression, meaning thereby that the expression fee is not to be termed as "fee" in technical terms and just because it is termed as fee' does not ipso facto partake the colour of statutory dues. Therefore, the said term should not be used in literal sense because the expression "fee" is used for various purposes. ii. The expressions used in section 43B(i)(a) is "Tax, Duty, Cess or fee or by whatever name called", must fall within the genus '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 expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 ride 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 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 30.03.2021 passed u/s 201(1)/201(1A) of the IT Act for FY 2012-13, relevant to the present assessment year 2013-14, in para 5.4, the AO noted the entire facts regarding the payment of EDC by the assessee and categorically noted that EDC payment made by the assessee to HUDA is covered under service contract, therefore, a private builder is liable to deduct tax at source on such payment under the provisions of section 194C of the Act, hence, EDC ought to be subjected to TDS by payers @ 2% u/s 194C. The ld. AR submitted that in view of the above, the payment made by the assessee towards EDC is to be allowed to the assessee. 5. Placing reply to the above, the ld. Sr. DR strongly supported the 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 sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial, commercial and institutional purposes in urban estates developed in State of Haryana. Its income is taxable under the Income Tax Act including EDC. The payments received by HUDA as EDC are for external development works (EDWs) like water supply, sewerage, drains, sewage management, colleges, hospital etc. or any other works for the benefit of colony/area. EDC is charged from colonizers for using the developed urban infrastructure in urban estates wherein they are allowed to establish their commercial setup. The EDC is arising out of an agreement which is in the nature of service contract where colonizers pay EDC to HUDA for creation, development and maintenance of 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 paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Reference in this connection may be made to Amar Chandra v. Collector of Excise, Tripura (AIR 1972 SC 1863) and Housing Board of Haryana v. Haryana (AIR 1996 SC 434) 13. The 'Tax', 'Duty', 'Cess' or 'fee' constituting a class denotes to various kinds of imposts by State in its sovereign power of taxation to raise revenue for the State. Within the expression of each specie each expression denotes different kind of impost depending on the purpose for which they are levied. This power can be exercised in any of its manifestation only under any law authorising levy and collection of tax as envisaged under Article 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of Tamil Nadu Minerals Limited (supra) wherein their Lordships held thus:- "41.In our opinion, the application of Section 43B depends upon the character of the levy being either statutory or contractual (nonstatutory). Once the levy in the present case in the form of 'nomination charges' depending upon the quantum of land and the commercial exploitation of the minerals by the Assessee is held to be non-statutory contractual payment, then Section 43B of the Act will not cover the case in hand and therefore, the Assessee was entitled to deduction of such 'nomination charges' paid 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. The AO himself noted that the payment of EDC to HUDA is subject to TDS @ 2% u/s 194C of the Act 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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