2013 (3) TMI 394 - HC - Income Tax

High Court affirms deduction for market fee under Income Tax Act, distinguishing it from tax

Commissioner, of Income, Tax-II Kanpur Versus Moti Lal Padampat Udyog Ltd.

Commissioner, of Income, Tax-II Kanpur Versus Moti Lal Padampat Udyog Ltd. - [2013] 357 ITR 705 Issues Involved:1. Recall of original order by Income Tax Appellate Tribunal (ITAT) under Section 254(2) of the Income Tax Act, 1961.2. Justification for recalling the ITAT's order without finding a mistake apparent from the record.3. Allowing the assessee's miscellaneous application based on mistakes apparent from the record.4. ITAT's power to review its own order.5. Deduction claim on account of Market Fee by the assessee.6. Applicability of Section 43B of the Income Tax Act, 1961 to the market fee collected on past transactions.Detailed Analysis:1. Recall of Original Order by ITAT under Section 254(2):The appellant questioned whether the ITAT could recall its order dated 26.02.2002 under Section 254(2) of the Income Tax Act, 1961, without pointing out any specific error. The Tribunal had recalled its order on the ground that it had made a mistake by applying the Supreme Court's judgment in Allied Motor (P) Ltd. Vs. Commissioner of Income Tax and others (1997) 224 ITR 677, which was relevant to sales tax deductions, not market fee.2. Justification for Recalling the ITAT's Order:The appellant contended that the ITAT recalled its order without recording a finding that the order suffered from a mistake apparent from the record. The Tribunal, however, relied on its earlier order dated 21.12.2001, which allowed the assessee's deduction claim for the market fee, indicating a mistake in the application of the Supreme Court's judgment.3. Allowing the Assessee's Miscellaneous Application:The appellant argued that the ITAT was not justified in allowing the assessee's miscellaneous application on the ground of mistakes apparent from the record. The Tribunal had accepted the application based on its previous ruling in favor of the assessee regarding the market fee deduction.4. ITAT's Power to Review its Own Order:The appellant questioned whether the ITAT has inherent power like a court of law to review its own order. The Tribunal, by recalling its order and allowing the assessee's appeal, effectively reviewed its earlier decision.5. Deduction Claim on Account of Market Fee:The core issue revolved around the assessee's claim for a deduction of Rs. 11,05,123/- as market fee under the Bihar Agricultural Produce Market Act, 1960, and the Bihar Agricultural Produce Market Rules, 1975. The Assessing Officer disallowed the claim, asserting that the market fee was a tax and, under Section 43B of the Act, deductions could only be allowed on actual payment. The Tribunal initially upheld this view but later reversed it, allowing the deduction.6. Applicability of Section 43B to Market Fee:The appellant argued that Section 43B, which mandates actual payment for deductions of tax or duty, should apply to the market fee. The Tribunal, however, distinguished between 'tax' and 'market fee,' citing various judgments, including Kewal Krishan Puri Vs. State of Punjab and others, which held that market fee is not a tax. The Tribunal concluded that the amendment to Section 43B by the Finance Act, 1988, which included 'cess or fee,' was not retrospective and thus did not apply to the assessee's case for the relevant assessment year.Conclusion:The High Court dismissed the appeal, affirming the Tribunal's decision to allow the deduction for the market fee. The Court held that the amendment to Section 43B by the Finance Act, 1988, was not retrospective and that market fee is distinct from tax. Consequently, Section 43B did not apply to the market fee in this case, and the assessee was entitled to the deduction. The Court also noted that the appellant had not challenged the Tribunal's order dated 29.08.2002, which further weakened the appellant's position on the substantial questions of law.