Income Tax Appellate Tribunal - Hyderabad
Income-Tax Officer vs Sree Dhanalakshmi Rice Co. on 26 August, 1986
Equivalent citations: [1986]19ITD601(HYD)
ORDER
T. Venkatappa, Judicial Member
1. The Agricultural Marketing Committee levied a fee of Rs. 25,298. Since the said liability was not paid during this year, the ITO disallowed the same under Section 43B of the Income-tax Act, 1961 ('the Act'). On appeal, the Commissioner (Appeals) held that it is a fee but not tax and so Section 43B cannot be applied. The payment of fee can be on mercantile basis. Thus, he deleted the disallowance of Rs. 25,298. Against the same the revenue has preferred this appeal.
2. The learned departmental representative submitted that the fee levied is nothing but tax and it is disallowable under Section 43B. The learned counsel for the assessee urged that there is distinction between fee and tax and what is levied by the Agricultural Marketing Committee is only fee but not tax. Hence, Section 43B is not applicable.
3. We have considered the rival submissions. Under Section 43B a sum payable by way of tax or duty shall be allowed only in the year in which it was actually paid. The question is whether the fee levied by the Agricultural Marketing Committee is fee or tax. If it is a tax it is disallowable under Section 43B as the liability is not paid in this year. The distinction between fee and tax has come up for consideration in a few cases. In Commissioner, Hindu Religious Endowments v. Sri Lakshmindra Thirtha Swamiar of Shri Shirur Mutt AIR 1954 SC 282, the Supreme Court held that the levy of tax is for the purpose of general revenue and there is no element of quid pro quo between the taxpayer and the public authority whereas a fee is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden while a fee is payment for a special benefit or privilege which the individual receives. In Sudhindra Thirtha Swamiar v. Commissioner for Hindu Religious & Charitable Endowments AIR 1963 SC 966, the Supreme Court held that a fee being a levy in consideration of rendering service of a particular type, correlation between the expenditure incurred by the Government and the levy must undoubtedly exist, but a levy will not be regarded as tax merely because of the absence of uniformity in its incidence or because of compulsion in the collection thereof nor because some of the contributories do not obtain the same degree of service as others may. In Hingir-Rampur Coal Co. Ltd. v. State of Orissa AIR 1961 SC 459, the Supreme Court held that if specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. In regard to fees, there is, and must always be correlation between the fee collected and services intended to be rendered. The distinction between a tax and fee is important and it is recognised by the Constitution. Kewal Krishan Purl v. State of Punjab AIR 1980 SC 1008 is a case where the validity of the fixation of the market fees under the Punjab Agricultural Produce Markets Act, 1961 came up for consideration before the Supreme Court. In that case it was held that the Constitution clearly draws a distinction between imposition of a tax and the imposition of fees. Fee is charged for the services rendered. In Sreenivasa General Traders v. State of Andhra Pradesh AIR 1983 SC 1246, the Supreme Court considered the validity of the enhancement of fee under Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966. It was held therein that the distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden while a fee is for payment of a specific benefit or privilege. In regard to fees there is, and always be, correlation between the fee collected and the service intended to be rendered.
4. The ratio laid down in the above cases would squarely apply to the instant case. In the above cases a clear distinction has been made between a tax and a fee. 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 a fee is generally levied for special services rendered to the individual by some governmental agency. Thus, the fee levied under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act is only a fee but not a tax. The learned departmental representative relying on certain observations of the Supreme Court in Sreenivasa General Traders' case {supra) tried to submit that there is no difference between tax and fee. We do not think that the observations therein would in any way support the revenue. We have already referred to that decision. The distinction between tax and fee has been clearly brought out in the above cases. In the instant case what is levied is fee but not tax. Hence, Section 43B cannot be applied. Hence, the disallowance made of Rs. 25,298 under Section 43B is not justified. The Commissioner (Appeals) was right in deleting the sum of Rs. 25,298. We uphold his order.
5. In the result, the appeal fails and is dismissed.