S. K. KULSHRESTHA, J. :
The Tribunal, Nagpur Bench, Nagpur has referred the following questions for the opinion of this Court, as arising out of the order dt. 13th Feb., 1992 of the Tribunal in ITA No. 641/Nag/87, for the asst. yr. 1985-86 -
'1. Whether, on the facts and in the circumstances of the case the Tribunal was correct in law in upholding the order of CIT(A) who deleted the addition of Rs. 1,12,269 made by the AO by disallowing the liability towards mandi tax payment by invoking provisions of s. 43B of IT Act 1961 ?
2. Whether the Tribunal was correct in law to hold that mandi tax was a fee and as such fall outside the purview of provisions of s. 43B ?
3. Whether the Tribunal was correct in law to hold that the decision of Honble Gujarat High Court in the case of Lakhanpal National Ltd. : [1986]162ITR240(Guj) and the decision of the Tribunal. Indore Bench, Indore in the case of M/s. Gulanchand Kailashchand were not applicable ?'
2. The respondent-assessee was a dealer in kirana and general goods, grains and other items. The assessee claimed the liability of Rs. 1,12,269 towards payment of mandi tax from the business profit during the accounting period relevant to the asst. yr. 1985-86. It was, however, not disputed that this amount was not paid but only provision for meeting the liability was made. The AO disallowed the claim in view of the provision of s. 43B of the IT Act, 1961. Against the order of the AO, an appeal was preferred to the CIT(A) which was allowed by him on the ground that the tax did not fall within the purview of s. 43B and deduction could be claimed since the accounts were maintained on mercantile basis. The Department filed an appeal against the decision of CIT(A) contending that liability could not be allowed in view of the provision of s. 43B of the Act, which was dismissed on the ground that there was distinction between tax and fee and since in the case of the assessee, it was fee and not tax, provisions of s. 43B were not applicable. The Department thus raised the above question for being referred under s. 256(1) of the Act and accordingly the said questions have been referred for the opinion of this Court.
3. We have heard the learned counsel for the parties and perused the record.
4. Sec. 43B as it stood during the period relevant to the assessment year in question provided that notwithstanding anything contained in any other provision of the Act, a deduction otherwise allowable under the Act in respect of any sum payable by the assessee by way of tax or duty under any law for the time being in force shall be allowed only in computing the income of the previous year in which such sum is actually paid by the assessee. By an amendment by the Finance Act, 1988 sum payable towards cess and fee were also included which clearly indicates that the provision as it stood at the relevant time did not include or encompass cess or fee. The short question that falls for our consideration, therefore, is whether the mandi tax or market fee is tax or fee, as in case it is fee, the provision of s. 43B as it then stood, would not apply. The levy of tax is for the purpose of general revenue and there is no element of quid pro quo between a taxpayer and public authority whereas fees is generally levied for special services rendered. The Supreme Court in Kewal Krishan vs. State of Punjab AIR 1980 SC 1008 has held that such amounts charged are 'fees' having the requisite element of quid pro quo.
5. From the above decision it is clear that notwithstanding the nomenclature applied, the amount for which the provision was made was 'fee' and not tax and therefore, the provisions of s. 43B, in the year in question were not attracted. In this view of the matter, the addition of Rs. 1,12,269 was rightly deleted by the CIT(A) and the order was rightly upheld by the Tribunal. The question No. 1 is, therefore, answered against the Revenue and in favour of the assessee. As a corollary, the questions No. 2 & 3 are also answered against the Revenue and in favour of the assessee.