Ajit K.Sengupta, J.

(1) In this reference, made at the instance of the Revenue, the following questions have been referred by the Tribunal for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) to the effect that expenses on repairs and insurance, etc., on motor cars are not disallowable under Section 37(3A) of the Income-tax Act, 1961 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) to the effect that the unpaid amounts under the Cement (Control) Order, 1967, of Rs. 18,37,851 and under the Water (Prevention and Control of Pollution) Cess Act, 1977, of Rs. 2,87,245 were not hit by the provisions of Section 43B of the Income-tax Act, 1961 " This reference relates to the income-tax assessment of the assessee-company for the assessment year 1984-85. The first question is directly covered by the decision of this court in CIT v. Tungabhadra Industries Ltd. [1994] 207 ITR 553 [LQ/CalHC/1991/516] , in which the judgment was delivered on November 28, 1991. Following the said judgment, we answer question No. 1 in the affirmative and in favour of the assessee.

(2) Question No. 2 relates to liabilities in respect of Rs. 18,37,851 payable under the Cement (Control) Act, 1967, and Rs. 2,87,245 under the Water (Prevention and Control of Pollution) Cess Act, 1977. In regard to the first amount, the Commissioner of Income-tax (Appeals) found that under clause 9 of the Cement (Control) Order, 1967, every producer was required in respect of each transaction by way of sale of cement or on arrival of cement from the factory to pay an amount equivalent to the amount, if any, by which "free on rail destination" price (i.e., price including cost of transport by the cheapest mode) of such cement exceeded the aggregate of certain amounts as detailed in the said clause. This amount was payable within one month in which such sales or removals took place. As per clause 9A of the Cement (Control) Order, 1967, every producer was required to pay at Rs. 9 per metric ton on non-levy cement. Clause 9 contained provisions as to the manner in which the amount paid to the Controller under the Cement (Control) Order was to be utilised. The main purpose of collection under the above control order was to equalise the expenditure incurred by different producers of cement. The Commissioner of Income-tax (Appeals) further observed that the amount collected under the said control order did not form part of the general revenues of any Government or local authority and was contributed specifically for being utilised for the benefit of producers of cement in the manner laid down in the said order. The Commissioner of Income-tax (Appeals), therefore, held that the provisions of Section 43B had no application to the amount payable under the Cement Control Order, 1967, since the same was neither tax nor duty. This view of the Commissioner was later upheld by the Tribunal. We have looked into the Cement (Control) Order, 1967, and we find that the Commissioner of Income-tax (Appeals) correctly analysed the provisions of the said order. The amount payable by a manufacturer under the said order did not partake of the character of tax or duty and, therefore, the provisions of Section 43B are not applicable.

(3) As regards the amount payable under the Water (Prevention and Control of Pollution) Cess Act, 1977, the Assessing Officer found that the assessee had two factories, one at Amlai and the other at Brajrajnagar. For the purpose of manufacture of paper and in respect of supply of water, the assessee was required to pay cess under the Water (Prevention and Control of Pollution) Cess Act, 1977. In respect of water consumed at the two places, the assessee was to pay more than Rs. 5 lakhs and at the close of the previous year relevant to the assessment year 1994-85, a sum of Rs. 2,87,245 was outstanding. The cess, according to the assessee, was payable as if it were a price for the consumed water and, hence the same was not hit by the provisions of Section 43B of the Income-tax Act, 1961. This contention of the assessee was rejected by the Assessing Officer and the outstanding amount of Rs. 2,87,245 was disallowed under Section 43B of the said Act.

(4) The Commissioner of Income-tax (Appeals) examined the provisions of the Cess Act and found that cess was levied by the Government on industries for the water consumed and was to be calculated with reference to the quantity of water consumed by the industry. He, therefore, held that the cess related to supply of material, i.e., water and there was a quid pro quo relation between the levy of cess and the supply made. The Commissioner of Income-tax (Appeals), therefore, held that the cess cannot be considered to be tax or duty within the meaning of Section 43B of the said Act. The Tribunal affirmed the view of the Commissioner of Income-tax (Appeals).

(5) We find that Clause (a) of Section 43B of the said Act has since been amended by the Finance Act, 1988. As a result of the amendment, Section 43B is now applicable not only to tax and duty but also to cess or fee, by whatever name called, payable under any law for the time being in force. This amendment, in our view, is clarificatory in nature and, therefore, has retrospective operation. We have already held in CIT v. Bengal Tea and Industries Ltd. (Income-tax Reference No. 83 of 1992), judgment wherein was delivered on October 4, 1993, that Section 43B also applied to cess even in relation to the assessment year 1984-85. Following the said decision, we hold that the Tribunal was not justified in directing that the liability of Rs. 2,87,245, as was outstanding under the Water (Prevention and Control of Pollution) Cess Act, 1977, was not covered by Section 43B of the said Act.

(6) We, therefore, answer the second question by saying that while the Tribunal was justified in upholding the order of the Commissioner (Appeals) to the effect that the unpaid amount under the Cement (Control) Order, 1967, was not hit by the provisions of Section 43B of the said Act, the Tribunal was not justified in upholding the order of the Commissioner (Appeals), wherein he held that the sum of Rs. 2,87,245, which was payable under the Water (Prevention and Control of Pollution) Cess Act, 1977, was outside the mischief of Section 43B. This sum of Rs. 2,87,245, in our view, was clearly hit by the provisions of Section 43B. The second question is answered accordingly, in the affirmative and in favour of the assessee in respect of the unpaid amount under the Cement (Control) Order, 1967, and in the negative and against the assessce in respect of the unpaid cess under the Water (Prevention and Control of Pollution) Cess Act, 1977.