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2020 Supreme(Ker) 224
IN THE HIGH COURT OF KERALA AT ERNAKULAM
C.K. Abdul Rehim, T.V. Anilkumar, JJ.
Kerala State Beverages (Manufactoring And Marketing) Corporation Limited - Appellant
Versus
Assistant Commissioner of Income Tax Circle-1 (I), Trivandrum - Respondent
I.T. Appeal Nos. 135, 146 & 313 of 2019
Decided On : 30-04-2020
For the Appellant : Sri. Anil D. Nair, Sri. Sreejith R. Nair, Sri. Achyut K Padmaraj, Smt. Arya Anil, Shri. Gokulraj L.
For the Respondent: Shri. P. Vijayakumar, Asg of India
IMPORTANT POINTS
• A fee may be generally defined as a charge for special services rendered to individuals by some Governmental agencies. Various decisions of other High Courts are also pressed into service to content that 'tax' and 'dues' are not same as 'cess or fee or charge'.
• On analysing the rival contentions, we take note of the fact that the surcharge on sales tax was introduced only as an increase in the tax payable. Merely because the statute imposed a prohibition with respect to passing on such liability to others, the basic characteristics of the levy is not changed. As settled through various legal precedents, a 'tax' cannot by equated with a 'fee or charge'
Headnote:
Income Tax Act, 1961- Section 40 (a) (iib) -- When the provisions contained in Section 40 (a) (iib) is clear in its terms that it will take in only 'fee or charges' enumerated therein or any 'fee or charge by whatever name called, it is clear that any levy of 'tax' is outside the ambit and scope of the said provision- Inorder to include surcharge on sales tax or turnover tax within the sweep of Section 40 (a) (iib), it becomes necessary to read something into the provision. Therefore we are inclined to accept the view as contended by the appellant, that the disallowance of surcharge on sales tax and turnover tax cannot be sustained.
Statement of facts:
Appellant is a company registered under the Companies Act, engaged in wholesale and retail trade of be averages within the State of Kerala, and is a 'State Government Undertaking' falling within the 'Explanation' provided under Section 40 (a) (iib) of the Income Tax Act, 1961 -With respect to the assessment year 2014-2015, the Deputy Commissioner of Income Tax, Circle-2 (1), Thiruvananthapuram finalized the assessment of income tax against the appellant, under Section 143 (3) of the Act, through the order of assessment- Income Tax Appeal Nos. 135/2019 & 146/2019 are filed challenging a common order passed by the Income Tax Appellate Tribunal-The assessee was the appellant before the Tribunal, who is the appellant herein. The revenue is the respondent.
Finding of the court:
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 government undertaking. Therefore the disallowance made with respect to those amounts cannot be sustained. The surcharge on sales tax and turnover tax is not a 'fee or charge' coming within the scope of Section 40 (a) (iib) and is not an amount which can be disallowed under the said provision. Therefore the disallowance made in this regard is liable to be set aside.
Result: Income Tax Appeals are disposed of
JUDGMENT :
Abdul Rehim, J.
Income Tax Appeal Nos. 135/2019 & 146/2019 are filed challenging a common order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA Nos.536/Coch/2018 and 537/Coch/2018, dated 12-03-2019. Income Tax Appeal No.313/2019 is filed against the revised order passed by the same Tribunal ITA No.537/Coch/2018, dated 11-10-2019. The assessee was the appellant before the Tribunal, who is the appellant herein. The revenue is the respondent.
2. Appellant is a company registered under the Companies Act, engaged in wholesale and retail trade of be averages within the State of Kerala, and is a 'State Government Undertaking' falling within the 'Explanation' provided under Section 40 (a) (iib) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short). With respect to the assessment year 2014-2015, the Deputy Commissioner of Income Tax, Circle-2 (1), Thiruvananthapuram finalized the assessment of income tax against the appellant, under Section 143 (3) of the Act, through the order of assessment dated 14-12-2016. But, the Principal Commissioner of Income Tax, Thiruvananthapuram initiated proceedings under Section 263 of the Act and set aside the order of assessment, on holding that the 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 turn over 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 of Income Tax, issued under Section 263 of the Act, dated 25-09-2018, the appellant approached the Tribunal in ITA No.536/Coch/2018.
3. With respect to the 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, through the 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/-was disallowed under Section 40 (a) (iib). Aggrieved by the said order the appellant approached the Commissioner of Income Tax (Appeals), Thiruvananthapuram. But the first appellate authority had dismissed the appeal. The appellant took up the matter in second appeal before the Tribunal in ITA No.537/Coch/2018.
4. The Tribunal considered ITA Nos.536 & 537/Coch/2018 together and dismissed them through a common order passed on 12-03-2019. The assessee thereafter filed MP No.47/Coch/2019 seeking rectification of a mistake in the order of the Tribunal in ITA No.537/Coch/2018, on the ground that the Tribunal had failed to consider the issue agitated against disallowance of the surcharge on sales tax, and there occurred failure to adjudicate on that issue. Hence the order passed by the Tribunal in ITA No.537/Coch/2018, dated 12-03-2019 was requested to be recalled. The Tribunal allowed the Miscellaneous Petition and recalled the order dated 12-03-2019 in ITA No.537/Coch/2018. The issue mentioned above was reconsidered and a fresh order was passed on 11-10-2019, finding the issue against the appellant and dismissing the appeal. It is the said order of the Tribunal dated 11-10-2019 which is challenged in ITA No.313/2019. Since the issue to be considered is common in all the three appeals, the above appeals were heard together and disposed of through this common judgment.
5. Heard; Shri. Anil D. Nair, learned counsel for the appellant and Shri. P. Vijayakumar, learned Assistant Solicitor General appearing for the respondent-Assessing Officer,
6. Common question of law arising in these cases is that, whether the Gallonage Fee, Licence fee, Shop rental (Kist) and Surcharge on sales tax and turn over tax, with respect to which debits were made by the a
