Tax implications of payments made for use of railway assets
With a view to ensure the prompt payment of dues to railways for use of the railway assets, section 43B is expanded and the same is reproduce below:
Section 43B. Certain deductions to be only on actual payment.
Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—
- any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or – for example – GST
- any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or
- any sum referred to in section 36(1)(ii) or
- any sum payable by the assessee as interest on any loan or borrowing from any PFI or a SFI or a State industrial investment corporation, or
- any sum payable by the assessee as interest on any loan or advances from a scheduled bank [or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], or
- any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee, or
- any sum payable by the assessee to the Indian Railways for the use of railway assets,
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him :
Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under section 139(1) in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return
Reporting requirements as to payment being made for use of railway assets by tax auditor:
(A) pre-existed on the first day of the previous year but was not allowed in the assessment of any preceding previous year and was
- paid during the previous year;
- not paid during the previous year;
(B) was incurred in the previous year and was
(a) paid on or before the due date for furnishing the return of income of the previous year under section 139(1);
Payments for the use of railway assets would not include basic rail freight, as such freight is for the service of transport and not for use of railway assets. The distinction between contracts of transportation and contracts for user (hire) of assets needs to be clearly made as per terms of contract entered into with the railways.
What are examples of payment made to railways for use of its assets:
- Amounts payable for hire of railway wagons, or
- for hire of rail sidings, or
- lease rent payable for use of railways land or buildings
- Advertisements in the premises of railways
Payments for use of hoarding / display panels:
In case of payments for use of hoardings/display panels put up on railway premises, whether the payment is for use of railway assets would depend upon the terms of the contract.
- In case the payment is being made by an advertising agency to the railways for putting up hoardings/display panels on railway premises, such payment would amount to payment for use of railway assets, as the payment is for the use of space on the premises.
- An advertiser is making payment to the railways for display of advertisements on hoardings/displays in railway premises, such a payment is in the nature of payment for the services of advertisement, and not for the use of railway assets