Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(ITAT) 5383

INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
Shri Vijay Pal Rao, VP, Shri Manjunatha G, AM
ANDHRA PRADESH BEVERAGES CORPORATION LIMITED HYDERABAD – Appellant
Versus
DCIT CIRCLE-1(1) HYDERABAD – Respondent
ITA.Nos.291 & 292/Hyd./2023

Advocates:
For the Appellants/Petitioners: Shri Y. Ratnakar, CA B Satyanarayana Murthy
For the Respondents: MS. M. Narmada, CIT-DR

The tribunal ruled fees levied under state regulation constitute government income, not taxable income for the corporation, affirming deductions under section 40(a)(iib) of the Income Tax Act.

Headnote:(A) Income Tax Act, 1961 - Section 40(a)(iib) - A.P. Regulation of Wholesale Trade Act, 1993 - Disallowances of privilege fee, special privilege fee, additional privilege fee, and contribution to CM Relief Fund - The appellant contends these amounts were appropriated directly by the state government, hence not income liable for taxation - Assessment orders were argued to be barred by limitation due to discrepancies in DINs, particularly referencing that the assessment order lacks a valid DIN as per procedural guidelines outlined. (Paras 8-19)

(B) Assessment Validity - The tribunal found the assessment order was not barred by limitation despite the multiple DIN references and confirmed that the assessment was valid as per existing instructions. The court concluded that assessments relating to privilege fees and other claims were improperly categorized as the appellant's income. The benefits and fees should be remitted directly to the government, thus not falling under the assessable income of the appellant. (Paras 20-24)

Facts of the case:
The appeals are related to the appellant corporation which underwent tax assessments for the assessment years 2014-2015 and 2015-2016, wherein significant disallowances were made by the assessing officer on various fees claimed by the appellant under the pretext that these constituted taxable income. The arguments presented included the timing of assessments in relation to procedural limitations and the nature of fees versus the income claimed. (Paras 1-3)

Findings of Court:
The tribunal ruled that the amounts collected under section 4A-C of the A.P. Regulation represent government levies, thus exempt from being counted as taxable income under the provisions cited. Additionally, dual counting of these fees was rejected, ordering the removal of double disallowances. (Paras 24-26)

Issues: Whether the assessment order was valid considering the different DIN numbers and whether the privilege fees fall under the taxable income of the appellant corporation. (Paras 8-10)

Ratio Decidendi: The tribunal emphasized that amounts levied are deemed to be income of the government and not of the appellant, and any appropriation claims towards those funds do not constitute income under the Income Tax Act, thus securing deductions from taxable income due to the nature of income sources. (Paras 20-22)

Result: Appeals partially allowed.

Table of Content
1. introduction and grounds of appeal. (Para 1 , 2)
2. factual background about the appellant corporation. (Para 3 , 4 , 5)
3. procedural history and prior rulings. (Para 6 , 7)
4. arguments concerning validity of assessment order. (Para 8 , 9 , 10)
5. court's findings on assessment order's validity. (Para 11 , 12)
6. contentions regarding privilege fees. (Para 13 , 14 , 15 , 16 , 17 , 18)
7. court's reasoning on privilege fees and state income. (Para 19 , 20 , 21 , 22 , 23 , 24)
8. final conclusions on disallowance and decisions. (Para 25 , 26 , 27)
9. further issues on assessment and conclusion. (Para 28 , 29 , 30)
10. conclusions on interest levies. (Para 31 , 32 , 33)
11. final order announcement. (Para 34 , 35 , 36 , 37)

ORDER

PER MANJUNATHA G.:

The above two appeals are filed by the Assessee against the order dated 30.03.2023 of the learned CIT(A)- National Faceless Appeal Centre [in short, the “NFAC”] Delhi, relating to the assessment years 2014-2015 & 2015- 2016. Since common issues are involved in both these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.

2. The assessee pleads the following grounds in it’s appeal ITA .No.291/Hyd./2023 for the assessment year 2014-2015:

1. “The order of the learned Commissioner of Income-tax (Appeals), Income-tax Department bearing DIN and Order No. ITBA/NFAC/S/250/2022-23/1051685248 (1) dated 30/3/2023 for asst. year 2014-15 is contrary to law and facts.

2. The learned CIT erred in dismissing the ground that the assessment is barred by limitation. The appellant contends that the asst. order was passed on 24/1/2020 while the limitation period for completing the assessment expired on 31/12/2019. The learned CIT(A) should have appreciated that the Assessment Order without DIN is invalid as per the Board Circular.

3. The learned CIT (A) erred in relying upon the clarification sought from Assessing Officer and screen shots without putting the same to the appellant for its objections.

4. The learned CIT(A) erred in confirming the addition/disallowance of the following items.

Description	Amount (Rs.)
Addition of privilege fees	Rs. 277,62,84,789
Addition of Special Privilege fees for sport promotion	Rs. 25,00,00,000
Addition of Additional Privilege fee	Rs. 429,23,75,131
Disallowance of Payment towards Leave encashment	Rs. 8,42,385
Disallowance of Payments towards PF/SF GF and other fund	Rs. 15,36,759
Total	Rs. 726,10,39,064

The above additions/disallowance made are erroneous and the CIT (A) erred in confirming the additions/ disallowance without appreciating the submissions put forth by the appellant.

5. The learned CIT(A) erred in ignoring the objections filed online on 29/3/2023 and also the petition filed for admission of additional grounds.

6. The learned CIT(A) erred in concurring with the observations of the Assessing Officer that the letters issued by the senior officer of the Government cannot be allowed to be relied upon by the appellant as evidence in support that the state government carried on the wholesale business in liquor. It is open to the appellant to rely upon any evidence in support of its plea and the assessing officer and CIT(A) are duty bound to consider the evidence.

7. The learned CIT(A) erred in observing that the senior officers do not have the authority to issue any clarification and they have no power to state the factual position.

8. The evidence produced forming part of paper book filed before CIT(A), in support that the state government carried on wholesale liquor trade were erroneously ignored by the CIT(A).

9. The learned CIT(A) erred in not considering the evidence produced before him. These have not been discussed by the Assessing officer or by the learned CIT(A) in any orders. In fact, the genuineness of this evidence was never doubted. The evidence placed on record unmistakably points out to the conclusion that the state government has carried on wholesale liquor business.

10. The

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2025 Supreme(Online)(ITAT) 5383

INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)Shri Vijay Pal Rao, VP, Shri Manjunatha G, AMANDHRA PRADESH BEVERAGES CORPORATION LIMITED HYDERABAD – AppellantVersusDCIT CIRCLE-1(1) HYDERABAD – RespondentITA.Nos.291 & 292/Hyd./2023

The tribunal ruled fees levied under state regulation constitute government income, not taxable income for the corporation, affirming deductions under section 40(a)(iib) of the Income Tax Act.

INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
Shri Vijay Pal Rao, VP, Shri Manjunatha G, AM
ANDHRA PRADESH BEVERAGES CORPORATION LIMITED HYDERABAD – Appellant
Versus
DCIT CIRCLE-1(1) HYDERABAD – Respondent
ITA.Nos.291 & 292/Hyd./2023