The main legal point established in the judgment is the interpretation of Section 40(a)(iib) of the Income-tax Act, 1961, to determine the deductibility of specific fees and taxes paid by the appellant.

JUDGMENT :

R. SUBHASH REDDY, J.

1. Leave granted.

2. These appeals are preferred, by the State-owned Undertaking, Kerala State Beverages Manufacturing and Marketing Corporation Ltd. a company registered under the Companies Act, 1956, engaged in the wholesale and retail trade of beverages, aggrieved by the common judgment and order dated 30.04.2020 passed in I.T.A. No. 135, 146 and 313 of 2019 by the High Court of Kerala at Ernakulam. The Civil Appeal arising out of S.L.P. (C) No. 12859 of 2020 is filed by the assessee and other three appeals are preferred by the revenue.

3. For the assessment year 2014-2015, the Deputy Commissioner of Income Tax, Circle-2(1), Thiruvananthapuram finalised the assessment of income of the appellant under Section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) vide Assessment Order dated 14.12.2016. The Principal Commissioner of Income Tax, Thiruvananthapuram has exercised power of revision as contemplated under Section 263 of the Act and set aside order of assessment on the ground that same is erroneous and is prejudicial to the interest of the revenue, to the extent it failed to disallow the debits made in the Profit and Loss Account of the assessee, with respect to the amount of surcharge on sales tax and turnover tax paid to the State Government, which ought to have been disallowed under Section 40(a)(iib) of the Act. Against order of the Principal Commissioner, Income Tax, dated 25.09.2018, the appellant herein filed appeal before the Income Tax Appellate Tribunal (in short ‘the Tribunal’) in ITA No. 536/Coch/2018.

4. With respect to Assessment Year 2015-2016 assessment against the appellant was completed under Section 143(3) of the Act by the Assistant Commissioner of Income Tax, Circle-1(1), Thiruvananthapuram vide order of assessment dated 28.12.2017. Debits contained in the Profit and Loss Account of the appellant with respect to payment of gallonage fee, licence fee, shop rental (kist) and surcharge on sales tax, amounting to a total sum of Rs. 811,90,88,115/- were disallowed under Section 40(a)(iib) of the Act. Aggrieved by the said order, appellant herein has filed appeal before the Commissioner of Income Tax (Appeals), Thiruvananthapuram and the same was dismissed. The appellant carried the matter by way of second appeal before the Tribunal in ITA No. 537/Coch/2018.

The Tribunal has dismissed the ITA Nos. 536-537/Coch/2018 by a common order dated 12.03.2019. The appellant herein thereafter has filed miscellaneous application in MP No. 47/Coch/2019 on the ground that the Tribunal had failed to consider the issue agitated against the disallowance of the surcharge on sales tax. The said miscellaneous application was allowed by recalling earlier order dated 12.03.2019 passed in I.T.A. No. 537/Coch/2018 and a fresh order was passed on 11.10.2019, finding the issue against the appellant and dismissing the appeal. Aggrieved by the aforesaid three orders, the appellant herein has filed Income Tax Appeals before the High Court in ITA Nos. 135, 146 and 313 of 2019 which are disposed, by the common impugned order. In the common impugned order passed by the High Court, the question of law raised, was answered partly in favour of the assessee/appellant and partly in favour of the revenue. Para 23 and 24 of the judgment read as under:

“23. While summing up the conclusions, we are persuaded to answer the question of law raised, partly in favour of the revenue and partly in favour of the assessee. We hold that the levy of Gallonage Fee, Licence Fee and Shop Rental (kist) with respect to the FL-9 licences granted to the appellant will clearly fall within the purview of Section 40 (a) (iib) and the amount paid in this regard is liable to be disallowed. The amount of Gallonage Fee, Licence Fee, or Shop Rental (kist) paid with respect to FL-1 licences granted in favour of the appellant, with respect to the retail business in foreign liquor, is not an exclusive levy on the appellant, which is a state gov