Back
2019 Supreme(Mad) 972
IN THE HIGH COURT OF JUDICATURE AT MADRAS
VINEET KOTHARI, C.V. KARTHIKEYAN, JJ.
M/s. Tamil Nadu Minerals Limited, Chennai - Appellant
Versus
The Joint Commissioner of Income Tax, Company Range III, Chennai - Respondent
Tax Case Appeal No. 1806 of 2008
Decided On : 22-04-2019
For the Appellant :M.P. Senthilkumar, Advocate.
For the Respondent:M. Swaminathan, Senior Standing Counsel, M/s. V. Pushpa, Advocate, S. Premalatha, Standing Counsels, Income Tax Department.
Headnote:
The payment of nomination charges by the assessee to the state government was not liable to be disallowed as an expenditure under section 43B of the Income Tax Act, 1961, since the said payment was not a statutory levy but a contractual payment and therefore, it did not fall within the ambit and scope of terms “tax, duty, cess or fee” appearing in Section 43B(a).
Fact of the Case:
The assessee, a government of Tamil Nadu undertaking, engaged in the mining, manufacture, and sale of granites, quarrying granite blocks from the mines leased out to it by the state government itself, filed an appeal under Section 260A of the Income Tax Act, 1961 ('Act') against the order of the Income Tax Appellate Tribunal ('ITAT'), which held that the “nomination charges” paid by the assessee to the state government at the rate of 10% of the turnover of granite blocks was liable to be disallowed as an expenditure under Section 43B of the Act.
Finding of the Court:
The court held that the payment of nomination charges was not a statutory levy but a contractual payment and therefore, it did not fall within the ambit and scope of terms “tax, duty, cess or fee” appearing in Section 43B(a). The court relied on the following factors to arrive at its decision: * Rule 8-C(7) of the Tamil Nadu Minor Mineral Concession Rules, 1959, which provides for quarrying of granite by the state government and granting of lease to a state government company or corporation. * The initial government order, G.O.(D)No.232, Industries (MME 2) Department, dated 23.08.2002, which prescribed a special levy of Rs.6 Crores as nomination charges for the year 2001-2002. * The subsequent government orders, G.O.(D) No. 317, Industries (MME2) Department, dated 23.12.2002, and G.O.(D) No.156, Industries (MME2) Department, dated 01.08.2003, which increased the nomination charges to 10% of turnover and 15% of turnover, respectively. * The judgment of the Supreme Court in the case of Commissioner of Income Tax v. McDowell & Co.Ltd. [(2009) 314 ITR 167 (SC)], which dealt with the case of furnishing of Bank Guarantee in place of actual payment and held that the Bank Guarantee furnished by the assessee would not amount to “actual payment” as required under Section 43B of the Act as the tax, duty, cess or fee constituting a class of various imposts by the State, covered by the ambit and scope of Section 43B of the Act.
Issues: Whether the payment of nomination charges by the assessee to the state government was liable to be disallowed as an expenditure under section 43B of the Income Tax Act, 1961.
Ratio Decidendi: The court held that the payment of nomination charges was not a statutory levy but a contractual payment and therefore, it did not fall within the ambit and scope of terms “tax, duty, cess or fee” appearing in Section 43B(a).
Final Decision: The court allowed the appeal in favor of the assessee and answered the substantial questions of law framed in favor of the assessee and against the revenue.
Dr. Vineet Kothari, J.
1. Tamil Nadu Minerals Limited (“TAMIN” in short), a Government of Tamil Nadu Undertaking, engaged in the mining, manufacture and sale of granites, quarrying granite blocks from the mines leased out to it by the State Government itself, has filed this appeal under Section 260A of the Income Tax Act, 1961 ('Act' in short), raising the following substantial questions of law, arising from the order of the Income Tax Appellate Tribunal, 'C' Bench, Chennai dated 30.06.2008 in ITA No.1541/Mds/ 2007 for the Assessment Year 2004-2005, whereby the learned Tribunal held against the Assessee that the “nomination charges” paid by it to the State Government at the rate of 10% of the turnover of granite blocks was liable to be disallowed as an expenditure on account of Section 43B of the Act, since the said payment was not made within the time allowed for filing of Return of income for the Assessment Year 2004-2005, i.e., 30.11.2004, but was paid to the State Government with a delay of 9 days on 09.12.2004, and thus the amount of Rs.11.54 Crores which was paid as 'nomination charges' by the present Assessee to the State Government, was disallowed as an expenditure in the computation of income in the present Assessment Year 2004-2005 and the tax thereon was imposed by the Assessing Authority to the extent of about Rs.5 Crores for the year in question.
2. The questions of law on which the present appeal was admitted on 11.11.2008 are as follows:
“1. Whether on the facts and in the circumstances of the case, the appellate Tribunal was right in holding that the “nomination charges”, being special levy imposed by the Government for allotment of land for quarrying of granite on nomination basis, can be equated with the terms “tax, duty, cess or fee” appearing in Section 43B(a), and the same had to be disallowed u/s.43B, when not paid within the due date for filing the return of Income?
2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in not holding that the payment of “nomination charges” is allowable business expenditure u/s.37 of the Act of 1961.”
3. The Commissioner of Income Tax (Appeals) as well as the learned Tribunal, negatived the contentions of the Assessee in this regard and upheld the disallowance made by the Assessing Authority on the anvil of Section 43B of the Act.
4. Learned counsel for the Appellant/Assessee Mr. M.P. Senthilkumar submitted that the payment of nomination charges as fixed by the State Government in G.O.(D)No.232, Industries (MME 2) Department, dated 23.08.2002, was “lease rental” only and was a contractual payment and not a “statutory levy” and therefore, it did not fall within the ambit and scope of terms “tax, duty, cess or fees” which are only covered by Section 43B of the Act and therefore, the said provisions of Section 43B of the Act did not apply to the said payment of “nomination charges” by the Assessee, a Government of Tamil Nadu Undertaking, to the State Government. He drew our attention to Rule 8-C(7) of the Tamil Nadu Minor Mineral Concession Rules, 1959 (“Rules” in short) which provides for quarrying of granite by the State Government and granting of lease to a State Government Company or Corporation. The said Rule 8-C(7) of the Rules provides that the lessee (present Assessee), besides area assessment, shall pay seigniorage fee or dead rent at the rate prescribed, from time to time, in Appendix II to the said Rules. The said Rule further provides that the lessee shall also pay such other levies as may be prescribed by the State Government, from time to time.
5. Initially, G.O.(D) No.232, Industries (MME 2) Department, dated 23.08.2002, provided for this special levy of Rs.6 Crores for the Assessee as 'nomination charges' to be levied for the Assessment Year 2001-2002, which was later on increased to 10% of turnover by G.O.(D) No. 317, Industries (MME2) Department, dated 23.12.2002, and further increased to 15% of turnover b
