External Development Charges aren’t tax, duty, cess, or fee: ITAT

Case Details: Vipul Ltd v. DCIT - [2022] 143 taxmann.com 105 (Delhi-Trib.)

Judiciary and Counsel Details

• • C.M. Garg, Judicial Member & Pradip Kumar Kedia, Accountant Member
  • Sidhant Arora, CA for the Appellant.
  • Ramdhan Meena, Sr. DR for the Respondent.

Facts of the Case

The assessee was a corporate entity engaged in real estate business operating in Haryana. The assessee incurred some External Development Charges (EDC) payable to Haryana Urban Development Authority (HUDA). During the assessment, the Assessing Officer (AO) disallowed EDCs incurred by invoking section 43B, claiming it to be in the nature of the tax, duty, cess, or fees or by whatever name called.

On appeal, the CIT(A) confirmed the order of AO. Aggrieved-assessee filed the instant appeal before the Delhi Tribunal.

The Tribunal relied upon the judgment passed by the Hon’ble Supreme Court in the case of CIT vs. McDowell & Co. 180 Taxmann 514 (SC). The SC held that under Article 366(28) of the Constitution, ‘Taxation’ has been defined to include the imposition of any tax or impost whether general or local or special and tax shall be construed accordingly.

Thus, the expression ‘Duty, Taxes, Cess or fees or by whatever name called’ should be construed in the limited range of the same kind.

ITAT Held

The Tribunal held that the word ‘fee’ in section 43B(a) is to be interpreted ‘ejusdem generis’, the words “tax”, “duty” and “cess” preceding it. When so interpreted, it would be clear that EDC is not a ‘fee’ for the purpose of section 43B(a) as it is amply clear from HUDA Rules that it is a charge paid for obtaining the services from the HUDA authority like sewage, roads, lighting, etc. In case the assessee does not avail of such facility, he is entitled to refund or adjustment of payment.

Accordingly, as the payment is made against the facilities availed by the developer, EDC cannot be put in the basket of mandatory or compulsory payment of duty, tax, cess, or fee. Therefore, section 43B does not stand attracted in the present case to the payment of EDC by the assessee.