2018 (4) TMI 1070 - HC - Income Tax

Stay petition - whether levies are not exclusive levies falling within the scope of Section 40(a)(iib) of the Act? - Held that - A reading of Section 40(a)(iib) of the Act indicates that exclusivity in terms of the said provision is not to be determined with reference to the issue as to whether anybody else is also being levied the same fee or charge, but it has to be determined having regard to the object of the provision. Two views are possible in the matter and the appellate authority cannot therefore be found fault with for having imposed the impugned condition. The writ petition, is liable to be dismissed - having regard to the financial hardship pleaded by the petitioner, the time fixed for payment of 20% of the amount in terms of Ext.P9 order is enlarged for a further period of six weeks from today.

Summary

Issues:
1. Disallowance of deductions under the Income Tax Act for the assessment year 2015-16.
2. Imposition of conditions by the appellate authority in granting a stay on the outstanding demand.
3. Exclusivity of levies on the petitioner by the State Government.
4. Interpretation of Section 40(a)(iib) of the Income Tax Act.

Issue 1: Disallowance of deductions under the Income Tax Act for the assessment year 2015-16

The assessing officer disallowed deductions made by the petitioner towards various fees, including Gallonage fee, Licence fee, Shop license fee, and Surcharge on sales tax. The petitioner challenged this decision in appeal, arguing that these levies were not exclusive and should not have been disallowed. The appellate authority granted a conditional stay, leading to the question of whether the conditions imposed were justified.

Issue 2: Imposition of conditions by the appellate authority in granting a stay on the outstanding demand

The appellate authority imposed conditions on the petitioner when granting a stay on the outstanding demand, requiring them to pay 20% of the demand in monthly installments. The petitioner contested this condition, leading to a review of whether the conditions were reasonable and justified.

Issue 3: Exclusivity of levies on the petitioner by the State Government

The petitioner acknowledged having a monopoly in the wholesale liquor business in the State, holding an FL-9 license. The disallowed deductions, such as the Licence fee and Gallonage fee, were exclusive levies imposed by the State Government due to this monopoly. The petitioner's argument that certain deductions were applicable to others as well was analyzed in light of the exclusivity of the levies on the petitioner.

Issue 4: Interpretation of Section 40(a)(iib) of the Income Tax Act

Section 40(a)(iib) of the Income Tax Act prohibits certain deductions, including amounts levied exclusively on the assessee by the State Government. The court interpreted this provision, noting that exclusivity should be determined based on the object of the provision rather than the existence of similar levies on others. The court found that the appellate authority's imposition of conditions was reasonable given the circumstances, leading to the dismissal of the writ petition but granting an extension for payment due to financial hardship.

This detailed analysis of the judgment highlights the key issues addressed by the court regarding the disallowance of deductions, imposition of conditions, exclusivity of levies, and the interpretation of relevant provisions of the Income Tax Act.