Whether expression 'Tax, Duty, Cess or Fee or by whatever name called' mentioned in provisions of Sec 43B brings under its sweep port dues payable by assessee to a government agency - NO: ITAT

THE issue before the Bench is - Whether the expression 'Tax, Duty, Cess or Fee or by whatever name called' mentioned in the provisions of Sec 43B brings under its sweep port dues payable by the assessee to a government agency. And the answer of the Tribunal is NO.

Facts of the case

The assessee is a Special Purpose Vehicle designed for completion of work as per the agreement entered into between Maharashtra Maritime Board (MMB) and Balaji Leasing & Industries Co. Ltd. – a group concern of the assessee’s company. During assessment, AO had noticed that the assessee had claimed wharfage expenses/port dues of Rs.1.23 crores as compared to the last year expenditure at Rs.0.08 crores. When called for an explanation in this aspect, the assessee company submitted that it had entered into an agreement with Maharashtra Maritime Board (MMB) on 17.3.02. Pursuant to the said agreement, the assessee company started operation from one berth at Dighi Port. As per the said agreement, the assessee company had to pay the royalty to MMB for cargo handling at Dighi Port. The said expenditure claimed was thus relating to the whafage/port dues paid/payable by the assessee company to MMB. The AO however observed that the said agreement as per which, BLICL was to design, finance, construct, operate, maintain and manage a multi-purpose, common user port at Dighi. The MMB had agreed to grant licence for 50 years to BLICL to build a multipurpose common user port on Build, Own, Operate, Share and Transfer (BOOST) basis on the terms and conditions contained therein. Since the licence was given to BLICL, the assessee company was not required to pay any dues in the nature of wharege/port dues to MMB as the agreement was between MMB and BLICL. AO further noted that MMB was a Statutory Body incorporated under the Maharashtra Maritime Board Act, 1996. Hence any dues payable to MMB were statutory dues and were covered u/s. 43B. Hence, the provision made for the dues not paid to MMB because of any dispute of liability could not be allowed in the hands of the assessee. AO therefore disallowed the expenditure of Rs.82,92,783/- which was claimed to be payable by the assessee to MMB.

On appeal before CIT(A), assessee had submitted that the agreement entered in between MMB ‘the licensor’ and BLICL ‘the licensee’ contained a clause ‘corporate structure in 11.1’ wherein it had been provided that the project would be developed through a new Special Purpose Vehicle which would be registered under the Companies Act, 1956. This SPV would be the licensee under the agreement. Thereafter a Novation of Concession Agreement was signed in favour of Dighi Port Ltd. being SPV for the purpose of designing, developing, constructing, operating, maintaining and managing Dighi Port. It was also provided in the agreement that all the obligations and responsibilities which form part of original concession agreement and amended concession agreement would be effective from the date of concession agreement signed. Accordingly, all the liabilities had been vested in the assessee from the very beginning i.e. from the time when Concession Agreement was executed. Further that the MMB had entered into agreement wherein the tariff rates had been fixed at Rs.3/-, but the same was increased to Rs.30/-. Hence the assessee, having disputed the said increase in rates, was perforce required to make provision in accounts for the balance amount and therefore the said amount was liable to be allowed as deduction. CIT(A) observed that the AO had not considered the novation agreement between the assessee MMB and BIPL, vide which it had been agreed that Dighi Port would step into the shoes of BLICL and discharge all rights and obligations of BLICL. Hence it could not be said that Dighi Port had no locus-standi in wharfage/port dues payable of Rs.82,92,783/-. However, CIT(A) did not agree with submissions of the assessee that MMB was not a statutory body. He held that MMB was a Government organization, hence, the payment of wharfage/port dues was covered u/s. 43B. It was further observed that the assessee had not paid wharfage/port dues but made a provision in the profit and loss A/c. which was disallowable u/s. 43B. CIT(A) therefore confirmed the disallowance.

Having heard the matter, the Tribunal held that,

++ in the case of "CIT vs. McDowell & Co. Ltd." 2009-TIOL-74-SC-IT, SC while interpreting the provisions of section 43B(a) of the Act has held that it would be pertinent to note that the expression now used in Section 43B (i)(a) is "Tax, Duty, Cess or fee or by whatever name called". It denotes that items enumerated constitute species of the same genus and the expression 'by whatever name called' which follows preceding words 'Tax', 'Duty', 'Cess' or 'fee' has been used ejusdem generis to confine the application of the provisions not on the basis of mere nomenclatures, but notwithstanding name, they must fall within the genus 'taxation' to which expression 'Tax', 'Duty', 'Cess' or 'Fee' as a. group of its specie belong vis. 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 on principle as consideration payable under contract. The SC after detailed discussion of the matter held in the above mentioned case that the bottling fees for acquiring a right of bottling of IMFL which was determined under the Excise Act and Rule 69 of the Rules was payable by the assessee as consideration for acquiring the exclusive privilege. It was neither fee nor tax but the consideration for grant of approval by the Government as per terms of contract in exercise of its rights to enter a contract in respect of the exclusive right to deal in bottling liquor in all its manifestations. It was therefore held that since the said bottling fees was not the amount payable by way of any tax or duty or fee or cess, hence the same did not fall within the purview of section 43B;

++ similarly the Andhra Pradesh High Court in the case of "CIT vs. Andhra Ferro Alloys (P.) Ltd." has held that the electricity charges were in the nature of statutory liability and the unpaid disputed electricity charges could not be disallowed by invoking provisions of section 43B of the Act as the same were not payable by way of any tax or duty or fee or cess, but as a consideration for the use of electricity. The disallowance in question in this case is relating to wharfage/port dues which were in the shape of consideration payable by the assessee to the MMB as royalty for cargo handling at Dighi Port as per the contract between the parties. The said dues were not payable by way of tax, duty, cess or fee and hence as per the law laid down by the Hon’ble Supreme Court in the case of "CIT vs. McDowell & Co. Ltd." as well as by the Andhra Pradesh High Court in the case of "CIT vs. Andhra Ferro Alloys (P.) Ltd." the section 43B of the Act is not attracted in this case. Hence, the disallowance made/confirmed in this case by the lower authorities under section 43B of the Act was not called for and thus the finding of the CIT(A) in this respect is set aside and therefore ground No.1 of the assessee’s appeal is allowed.