BPTP PARKLANDS PRIDE LTD.,NEW DELHI vs. ADDL.CIT, RANGE- 5, NEW DELHI

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ITA 2949/DEL/2018Status: DisposedITAT Delhi07 February 2023AY 2014-153 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that payments of EDC and IDC do not attract the provisions of Section 43B of the Income Tax Act. These payments are for services like sewage and roads, and not mandatory duties or taxes.

What were the facts?

The assessee company paid External Development Charges (EDC) and Internal Development Charges (IDC). The Assessing Officer (AO) disallowed these payments under Section 43B, treating them as fees. The assessee relied on a previous Tribunal order, while the Revenue cited a Supreme Court judgment.

What were the issues?

Whether EDC and IDC payments are disallowable under Section 43B as fees, and if so, whether they need to be paid within the time stipulated by Section 139(1).

Which sections of the Income-tax Act were involved?

Section 43B,Section 139(1),Section 194C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHIBENCH ‘A’, NEW DELHI

Before: Sh. C. M. GargDr. B. R. R. Kumar

Hearing: 06.02.2023Pronounced: 07.02.2023

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of ld. CIT(A)-2, New Delhi dated 07.12.2017.

2.

The only issue involved in the appeal before us pertains to payment of External Development Charges (EDC) and Internal Development Charges (IDC) and disallowance u/s 43B by the AO treating them charges paid under the category “Fee”. Ld AR relied on the order of the Tribunal in case of Vipul Ltd in for the AY 2013-14, wherein one of the members of the Bench is the signatory, whereas, the ld CIT DR relied upon the judgment of Hon’ble Supreme Court of India in case of CIT, Kerala Vs. M/s. Travancore Sugars & Chemicals Ltd dated 07.05.2015.

BPTP Parklands Pride Ltd.

3.

Heard the arguments of both the parties and perused the material available on record.

4.

On perusal we find that the judgment of CIT, Kerala Vs. M/s. Travancore Sugars & Chemicals Ltd (supra) in not applicable to the facts of the case as the judgment dealt with vend fee in case of foreign liquor sell involved in the issue of Karnataka Excise Act 1965 read with section 43B of the Income Tax Act.

5.

For the sake of ready reference the relevant part of the order in the case of Vipul Ltd (supra) is reproduced as under:- “11. 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. 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 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 BPTP Parklands Pride Ltd. the relevant assessment year itself without any bar or application of section 43B of the Act.”

6.

Since the facts in the case akin to the issue adjudicated as above, we hereby hold that the payment of EDC and EDC do not attract the provisions of section 43B of the Act.

7.

In the result, the appeal of the assessee is allowed.

Order Pronounced in the Open Court on 07/02/2023.

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