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TMI Blog2014 (1) TMI 1777X X X X Extracts X X X X X X X X Extracts X X X X ..... fts are to be made in favour of Government of A.P for depositing in the P D Account. In this view of the matter, there cannot be any diversion of income by overriding title. For the same reason, the payment of surplus/margin /privilege fee etc., by whatever name called is only parting of the profit of the assessee corporation to the State. In the circumstances, it cannot be anything else but application of income and therefore not allowable as an expenditure. Though it may be a fact that the assessee corporation is carrying out the wholesale distribution of IMFL as an authority of government or on behalf of government but, that cannot be a reason for claiming immunity from taxation under the provisions of I T ACT in view of Article 289(2) of the Constitution. Though the learned AR had submitted that the ratio laid down in case of APHB (2013 (10) TMI 542 - ITAT HYDERABAD) would not be applicable to the facts of assessee’s case in view of factual difference, but on deeper examination, we are of the view that principles decided therein would also apply to the facts of the present case. In aforesaid view of the matter, all the contentions of the assessee with regard to non taxabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. While appeals for the assessment years 2008-09 and 2009-10 are against separate orders of CIT (A), Hyderabad, the appeal pertaining to the assessment year 2006-07 is against the order passed u/s263 of the Act. Since assessee is common, and identical issues are involved in these three appeals, these are heard, clubbed together and disposed of by this consolidated order for the sake of convenience. 2. Though facts are identical and issues are common in all the appeals, since the assessee has made his submissions in respect of appeal in ITA No.302/Hyd/13 relating to the assessment year 2008- 09, we will deal with the facts as involved in this appeal. 3. Briefly the facts as emanate from records are, the assessee company is sole wholesale distributor of alcoholic products in the State of Andhra Pradesh. While examining the return filed for the impugned assessment year, the Assessing Officer noticed that though the assessee had declared a turnover of ₹ 8348.05 crores for the impugned assessment year, but it has declared nil income under the regular provisions and book profit of ₹ 2,85,642/- u/s 115JB of the Act. He further noted that in the annual report the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the above expenditure claimed, the Assessing Officer accepted the expenditure towards sales-tax as an admissible deduction. With regard to the donation made to Chief Minister s Relief Fund, the Assessing Officer noted that the assessee itself had added it back in the computation of income as an inadmissible deduction and sought to claim the same as deduction u/s 80G of the Act. In fact, as would be evident from the final computation made by the Assessing Officer he allowed the claim of the assessee in this respect. Therefore, the only dispute remained with regard to the expenditure claimed towards privilege fee paid to the Government. of A.P. The details of which are as under:- i) Privilege fee Rs.1161.66 crores ii) Special privilege fees ₹ 228.11 crores iii) Special privilege fees for sport promotion ₹ 25.50 crores Total Rs.1415.28 crores. 5. The Assessing Officer asked the assessee to explain under what provision of excise law these payments were made and how it is claimed as deduction in comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per which it would follow that the assessee took into consideration the total margin and deducted there from special privilege fee for sports and CM s Relief Fund and the balance amount was paid as privilege fee. The Assessing Officer noted that on certain brands (fast moving brands ) 10% margin is obtained. On these brands, taking into consideration the cost of sale plus the margin and VAT 10% is derived and paid as special privilege fee. Thus, the special privilege fee is worked as a percentage of turnover on special brand. He further noted that as per record, there is no demand notice or working of privilege fee or special privilege fee or sports fee under the Excise Act. The entire margin is taken and it is bifurcated and paid under certain heads to the Government of A.P. In the aforesaid factual backdrop the Assessing Officer while considering admissibility of the deduction claimed by the assessee on account of privilege fee etc., found the following issues arising for consideration. i) Whether income has accrued and arisen to assessee on which assessee is liable to pay tax? ii) Whether the assessee is correct in deducting these sums first and declaring loss a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility as well as the deferred tax liability. Tax has to be first claimed as expenditure and the net profit is to be disclosed. The Assessing Officer noted that even according to the accounting standard -22 current tax liability is to be taken into consideration as an expense. Hence the assessee should have first deducted incometax liability as an expenditure and remitted the residuary sum as a margin, privilege fee, special privilege fee etc. 7. In this context, the Assessing Officer made a query to the assessee as to why this procedure was not followed. It was stated that alternative method of ascertaining the entire margin was adopted. In fact the entire margin was paid to the government. The assessee further stated that the taxas expenses was shown below the line in the annual statement. The Assessing Officer noted that the assessee had not followed the procedure laid down in section 23A of the Excise which according to assessee, is the basis of their claim. Had they drawn up the P L a/c before remitting the margin, they would have deducted the income-tax liability also. However, they have conveniently adopted an alternative method of taking the gross margin as fixed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of privilege fee to mobilise additional resources, further sums under the head special privilege fee and sports privilege fee are collected suitably by directing the Corporation to enhance the margin. It is not by specific levy of privilege fee or sports privilege fee in the sale bill that it is collected. Therefore, it is not passed on to any fund by over-riding title. Therefore, the entire resource mobilisation done by Government of A.P through the assessee corporation by raising the margin and collecting the same cannot be excluded from the trading receipts. Therefore, there cannot be any diversion of income by over-riding title. The Assessing Officer observed that the manner in which the computations are made by the company also shows that the entire margin was passed on to the Government. When the entire margin is sought to be taken away by the Government, it means it wants to take the entire profit. 9. Thus, the legislature in its wisdom introduced section 23A to enable the Corporation to pay the entire margin to the Government of A.P after deducting the expenses including taxes. However, the assessee Corporation ignoring the legislative intent of section 23A of Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee, special privilege fee and special privilege fee sports is not admissible. In this context, the Assessing Officer noted that in course of proceedings, when the auditor who certified annual accounts was called upon to clarify how the assessee is said to have complied with the provisions of company law and also with regard to the provisions of section 23A of the Act, the auditor vide letter dated 28-12-2010 claimed that the entire margin is to be paid as privilege fee to Government for the right obtained as sole dealer of alcohol and beverages. They have stated that the provision for tax has been done below the line. The profit has been arrived after allocating expenses and income and necessary provisions for taxation has been made which has been certified by CAG. 11. It was contended by the auditor that the assessee Corporation has to be treated as an extended arm of the Government. Hence it is but natural for the Government to exercise total control over the operations of the Corporation. The assessee being a Government company has to obey the directions of the Government. Though the auditor also raised various other contentions in support of its claim of deduction of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n are deemed as income of the state and this does not extend to the entire income of the assessee as the payments cover only part of the income and the balance amount of profit is remitted as donation on which deduction u/s 80G is claimed. The CIT (A) relying upon the decision of the Hon ble AP High court in case of APSCSC Ltd (149 ITR 497) noted that the Hon ble AP high court laid down 5 tests for a corporation to be termed as instrumentality of State. Even though the Hon ble High Court found the Corporation was meeting all the tests, still then the High Court held that an instrumentality is different from state and its income cannot be equated to that of a State. The CIT (A) further observed that if section 4C is interpreted in a manner to mean that income of the Corporation is that of the State then it would imply that legislation is passed by the State on a subject on which centre is only competent to legislate. In such event, the State law is bound to fail as there is repugnancy with central law. In this context the CIT (A) relied upon a decision of Hon ble Allahabad High Court in the case of UP Jal Nigam Ltd. (202 Taxman 285). The CIT (A) on interpreting section 4C was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions,contained in Part IX and IXA of the Constitution and Section 10(20) of the I.T.Act. Accordingly it held that in view of article 254 of the Constitution to the extent of repugnancy the Central Act shall prevail. 3. The appellant respectfully submits that the learned CIT(A) fell in error on relying on this decision to hold that the amendments to the State Act is repugnant to Central Act even without stating as to which power of the Centre the State has taken over while making amendments to the State Act, by referring specifically to such part of the provision in the amended Act. It is submitted that the amendments are carried out to the Andhra Pradesh Excise and Andhra Pradesh (Regulation of trade in Indian made Foreign Liquor, Foreign Liquor) Acts, (Amendment) Act, 2012(Andhra Pradesh Act No. 5 of 2012). Such Act is made under powers conferred, in Schedule VII, Entry 8 of List II of the Constitution of India. This provision deals with intoxicating liquors. This is exclusively in the State domain and as per the frame work of the Constitution of India Centre has no power what so ever on this. 4. The appellant submits that it has exclusive rights not just in making laws in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rictions and limitations on the trade or business in liquor as a beverage, which restrictions are in nature different from those imposed on trade or business in legitimate activities and goods and articles which are res commercium. Reference may be made to the judgments of this Court in Vithal Dattatraya Kulkarni and Others v. Shamrao Tukaram Power SMT and Others (1979) 3 SCC 212, P. N. Kaushal Others v. Union of India Others (1978) 3 SCC 558, Krishna Kumar Narulaetc. v. State of Jammu Kashmir Others AIR 1967 SC 1368, Nashirwar and Others v. State of Madhya Pradesh Others (1975) 1 SCC 29, State of A. P. Others v. McDowell Co and Others (1996) 3 SCC 709 and Khoday Distilleries Ltd. Others v. State of Karnataka Others (1995) 1 SCC 574. 22. Legislature, in its wisdom, has given considerable amount of freedom to the decision makers, the Commissioner and the State Government since they are conferred with the power to deal with an article which is inherently injurious to human health. 23. Section 14 of the Act indicates that the Commissioner can exercise his powers to grant licence only with the approval of the State Government because the State has the exclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration to be that of the State. The appellant further submits that the State while carrying out the amendments to the Excise Act etc., in no way has transgressed into the subjects that are meant for Centre in Entry 82 of List 1 of Schedule VII to Constitution of India, but confined only to the powers that are granted to it by the Constitution of India to deal with intoxicants. The appellant therefore submits that the conclusion of the learned CIT(A) that the amendments made by State to Excise Act etc., are repugnant to Central Act is without basis and without appreciating the Constitutional provisions under which the State has carried out the amendments. 8. In case the learned CIT(A) had in her mind about the amendment to hold the income to be that of the State, the appellant submits that the provision holding the income to be that of the State is not understood in its right perspective. Kind attention of the Hon'ble Tribunal is invited to the provisions of amended Act which is reproduced here under; 1. Levy of Trade margin Privilege fee etc: Sec.4-A: The Government shall from time to time specify the Trade margin, Privilege Fee or any other levy by whatever name called, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions are repugnant is erroneous and is without basis and contrary to facts, Judgements of Hon'ble Apex Court and provisions of Constitution of India. 10. The learned CIT(A) while holding the amendments to Act to be repugnant, fell in error in holding that retrospective amendment also is incorrect by misplaced reliance on the judgement of Supreme Court in the case of D.Cawasji Co reported in 150 ITR 648. Here again, the appellant submits that, the learned CIT(A) has not appreciated the facts on which the said judgement was rendered, and by overlooking other judgements of apex court which held that the State has all the power to enact law retrospectively. 11. In so far as the judgement of Hon'ble Supreme court in the case of Cawsji, upon which much reliance was placed by the learned CIT(A) the facts involved were totally different and the Hon'ble Court was dealing with different subject. In the said case, amendment that was carried out by the State to ratify the collections of Sales Tax was to nullify a judgement of High Court which has held such levy to be invalid. Even in the judgement of HMT that is referred to by the appellant the Apex Court expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power to hold a provision enacted by a State Government to be incorrect or invalid. Only a High Court or Supreme Court are conferred with powers under Article 226 or Article 32 of Constitution of India to go into the validity or otherwise of a provision of Statute. If the revenue has any reservations, it ought to have filed a writ before the High court questioning such amendment. 15. The next ground relate to the observations of the learned CIT(A) th,at the income belong to the appellant. The learned CIT(A) after holding that the amendments are repugnant and are invalid being retrospective went on to reiterate that the income from wholesale trade in liquor belong to the appellant. In this regard the appellant submits that the learned CIT(A) has not considered any of the facts or provisions of law before coming to such conclusion. The attention of the learned CIT(A) was drawn to the relevant provision by which the appellant was conferred the right to do whole sale trade. It was submitted that only by virtue of holding the appellant to be an authority acting on behalf of the State for the purposes of Sec.68-A of Excise Act the appellant carried on the trade. The relevant provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to remit entire sale proceeds to the State treasury and collecting the margins. The appellant further submits as per provisions of article 284 of Constitution of India once the funds of the State or Central are directed to be deposited in the Public account of State or Central and such remittances are other than revenues or public moneys raised or received by the State or Centre it belong to the State. The relevant article is reproduced here under: 284. Custody of suitors deposits and other moneys received by public servants an courts All moneys received by or deposited with (a) any officer employed in connection with the affairs of the Union or of a State in his capacity as such, other than revenues or public moneys raised or received by the Government of India or the Government of the State, as the case may be, or (b) any court within the territory of India to the credit of any cause, matter, account or persons, shall be paid into the public account of India or the public account of the State, as the case may be 19. As per the GO Ms.No.614 issued by Govt. of Andhra Pradesh the sale proceeds are remitted to the public deposit account and as per the above constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt as in the case of A.P.S.Civil supplies Corporation. The appellant's claim relate only to the income from wholesale trade in intoxicant. In view of these distinctive features those decisions has no application at all, and reliance on such decisions is totally misplaced. 22. The next ground relate to treating the payments to the state as application of income by the learned CIT(A): The learned CIT(A) having observed that the income belong to the appellant has held payments to the State is nothing but appropriation of profit. The appellant submits that such a conclusion is totally perverse without appreciating the facts. The provisions of Sec.23-A as it stood then or the amended provisions categorically hold that the trade in intoxicants belong to the State, and having being conferred the privilege to carryon such trade by the State, the appellant should remit the margins to the state. Once payments are as per the Statute for conferring the privilege, it amounts diversion by over riding title or business expenditure. In this regard kind attention of the Honourable I.T.A.T., is invited to the decision of this tribunal in the case of M/s.Swarnandhra IJMII Integrated Tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then CIT in ,his show cause letter proposed to treat the payments as application of income or appropriation of profits but has not passed any order after having the submissions on the same. A copy of the show cause letter Dt.2-2-2006 is placed at paper book page 123 and order ujs.263 Dt.20-3-2006 is placed at page 124 of the paper book. The appellant submits that not passing of an order after issue of show cause letter and receiving submission tantamount to acceptance of such submissions. In this regard kind attention of the Hon'ble Tribunal is invited to the judgement of A.P.High Court in the case of Spectra Shares reported in 354 ITR 35, where in their lordships while dealing with an appeal against order ujs.263 sustained by I.T.A.T., has held so. The relevant portion is as under: The contention of the Revenue that there are no reasons given by the Assessing Officer about the nature of activity of the assessee cannot be accepted because a query was raised by him in the course of the assessment proceedings and was replied by the assessee. Obviously, he was satisfied with the explanation of the assessee and therefore did not think that the issue needs to be specifically men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the A.P.Beverages Corporation Ltd./ to the Government in the manner specified by the Government. Privilege fee etc., uls.23(1), 23-A and 23-8 of the AP.Excise Act to be the income of the Government: See.4-C: Notwithstanding anything contained in this Act/ the AP Excise Act/ 1968 and the rules made there under or any order issued by the Government or the Commissioner of Prohibition and Excise/ all amounts paid by the Corporation from 21-7-1993 to the Commissioner of Prohibition and Excise or the Government as privilege fee or Special Privilege fee or any other fee or cess/ by whatever name called/ in consideration of the privilege conferred on the Corporation/ as per the provisions of sections 23(1)/ 23-A and 23-B of the A.P.Excise Act/ 1968 shall be deemed to be and always deemed to have been the income of the Government and due payment for the relevant years in terms of Section 4-B. 28. The appellant submits that reference to Sec.4-B by the learned C!T(A) is absolutely incorrect. This provision is prospective provision and not retrospective provision to apply to the assessment year in question. The relevant provision in the amended Act is SecAC which was reproduced here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the funds and that entire sales get remitted to the State as per GO and that the appellant gets the expenditure incurred through a OD account which again is funded by the Director Distilleries. The GO cited above demonstrates that the Director of Distilleries arrives at the privilege fee payable to the State to retain the same. Therefore the learned CIT(A) without looking into any 'of these submission which are facts and Government orders has patently erred in holding that there is no mechanism to arrive at the payment. 31. Lastly, the learned CIT(A) committed contempt of Supreme Court in holding that the fee should be fixed though it is brought to the notice of the learned CIT(A) that what is paid towards privilege is not a fee but a consideration as held by Supreme Court in various decisions that are referred to in the decision of Mc Dowels besides the one in the case of Sheopat Rai already referred to supra. The relevant portion of the decision is as under; Mc Dowels reported in 314 ITR 167 where it has held as under: Business expenditure disallowance u/s 43B-Bottling fees under excise law- Bottling fees for acquiring a right of bottling of IMFL determined un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinct from amount chargeable on principle as consideration payable under contract. 'tax', 'duty', 'cess' or 'fee' constituting a class denotes to various kinds of imposts by State in its sovereign power of taxation to raise revenue for the State. Within the expression of each specie each expression denotes different kind of impost depending on the purpose for which they are levied. This power can be exercised in any of its manifestation only under any law authorising levy and collection of tax as envisaged under Art. 265 which uses only expression that no 'tax' shall be levied and collected except authorized by law. It in its elementary meaning coveys that to support a tax legislative action is essential, it cannot be levied and collected in the absence of any legislative sanction by exercise of executive power of State under Art. 73 by the Union or Art. 162 by the State. Under Art. 366(28) taxation has been defined to include the imposition of any tax or impost whether general or local or special and tax shall be construed accordingly. Impost means compulsory levy. The well known and well settled characteristic of 'tax' in its w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporation is distinct from that of the State and if Section 4C newly inserted is interpreted to the contrary to mean that the income of the Corporation is that of the State, that would imply that legislation is passed by a State on a subject on which Centre is only competent to legislate (that is on Income Tax matters/exempting an appellant from Income-tax). The appellant submits that in its written submissions it has referred to the decision of the Supreme Court in the case of A.P.S.R.T.C. reported in 52 ITR 524 and drew particular attention to the following paragraph from that order the same is reproduced here for ready reference: 15. It may be that the statute under which a notification has been issued constituting the appellant corporation may provide expressly or by necessary implication that the income derived by the corporation from its trading activity would be the income of the State. The doctrine of the separate entity or personality of the corporation is always subject to the exceptions which statutes may create, and if there is a statutory provision which clearly indicates that despite the concept of the separate personality of the corporation, the carried on by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Submissions on this are already made. Without prejudice to the same, it is to submit that the Hon'ble Tribunal in the earlier round of proceedings for the above assessment year, has directed the learned C!T(A) to consider only the amendments thereby impliedly rejected all the other reasons for holding the payments to State as not allowable. Application of income also is one of the reasons in the earlier order. Therefore the appellant submit that the learned C!T(A) is not correct to give such finding once again instead of confining herself to the amendments that are directed to be considered by the I.T.A.T. 37. The next ground 12 relate to validity of amendments. Submissions are already made in respect of ground no.2. The appellant pray that the same may be considered for this ground also. 38. The next ground 13 also relate to retrospective amendment and submissions are already made on this issue in the earlier ground nO.2. 39. The next ground 14 relate to finding on allowability ujs.37. The appellant submit that submissions are made on this ground also while making submissions in the earlier grounds. 40. The next ground 15 relate application of AS-22 - this issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant respectfully submit that charging section comes into play only after determining the income in accordance with income-tax provisions. Before determining the income, it is also required to determine whether the income belong to assessee or not and later in accordance with the provisions contained in the Act, the income should be computed. 4. If the view is such that the enactment amending the provisions to 1993 Act by the State, has infringed the provisions of Sec.4, the honourable I.T.A.T., may please have a look at the enactment made by the State of A.P., which is being referred to as repugnant. Already submissions are made that there is nothing in the Act that is repugnant. At the cost of repetition, it is submitted that what the provisions state is that the margins paid as Privilege fee, Special privilege etc., by whatever name called is the income of the State and it always remained as income of the State. It is further submitted that if a party charges something and receives it, it is accepted that such a receipt in the hands of that party will be its income. The appellant submits that there cannot be any doubt on this proposition. Therefore the question that should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.614 belong to it. This does not interfere with the provisions of SecA of I.T.Act. The appellant further submits that the above referred enactment of the State has only declared the receipt in its hands as its income. Whether such payments by the appellant are allowable or not while computing income is to be determined by the Assessing officer before invoking provisions of Sec.4 of the I.T.Act. The state legislation nowhere meddled with the taxing provisions of the I.T.Act to prevent the AO from considering the payments under income-tax provisions. The appellant therefore submits that there is no repugnancy even after considering the provisions of section 4 of the IT Act. 7. The appellant with regard to application of income, besides what is submitted already, submits further that, to consider a payment to be application of income, besides deciding whether the income is earned by the appellant on its own, should also examine whether such payment is of that nature that it is not required to be paid otherwise. Only in such circumstances, where certain amount is paid without any requirement then it could be held as application of income. The appellant also invite attention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions already made. The appellant therefore submits that the stand of the learned CIT(A) that it is application of income is incorrect. 9. The appellant hereunder summarizes the submissions that are made as under: 1. The appellant never had any right to carryon business in intoxicants but has carried on such business by virtue of 1993 Act explanation, which conferred the right to act as an authority on behalf of the State for the purposes of Sec.68 A of Excise Act 68 and as such the income from such business belong to the State. 2. The appellant never received any amount and that entire sale proceeds are remitted to State PD alc held by Director Distilleries as per GO Ms.No.614. As per article 284 of Constitution, the proceeds belong to State. As per article 283 of Constitution from such proceeds, the Director rylakes payment for purchases, makes payment towards privilege fee, etc., provides for reimbursement of expenses drawn from an aD alc opene'd for that purposes. As such the question of making provision for income-tax or working out at the end of the day amount payable to State never arose and such observations of the learned CIT(A) is contrary to facts. 3. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the contentions of the assessee and also taken into consideration the amendments made to the Excise Act. It was submitted that after examining the amended provisions of section 4C, the CIT (A) had made a clear distinction between the nature of payment in the hands of the State Government and in nature of payment in the hands of the assessee. Though section 4C of the Excise Act states that payment made by the Corporation to the state is income of the state but that automatically cannot mean that income of Corporation is income of State. Further, the manner/mode of computation of privilege fee etc., clearly show that it is in the nature of computing net income or profit which is to be passed on to the State. Therefore, the privilege fee in case of the assessee is balancing charge on the P L account, the intention of the state is to appropriate 100% of profit, but such profit can be arrived only after meeting the expenditure which includes income-tax. In this context, he referred to AS-22 issued by the ICAI. It was submitted that a state legislation which confers income-tax exemption or excludes income of a corporation from chargeability to income-tax runs contrary to the charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31-5-2013. 17. The learned DR submitted that so far as the assessee s claim that the income from sale of IMFL is not taxable as per Article 289 of the Constitution, the same is not tenable because the conditions set out in Article 289, clauses 1,2, and 3 have not been satisfied. For this contention, the learned DR again referred to the decision of Income-tax Appellate Tribunal, Hyderabad Bench in case of APHB (supra). The learned DR submitted that the new provisions brought to the Excise Act nowhere prescribe how and on what basis privilege fee is to be determined. That is why one has to go back to section 23A of the Excise Act to infer that this is computed as a balancing figure. It was submitted that unlike corporations in other states which has specified the levy of such fee as a fixed amount under the rules or a specific amount based on the stock quantity and reflected in terms of rupee per litre, there is no specific name or basis for levy of such fee. The learned DR submitted that computation itself shows that the privilege fee etc., is calculated as a remainder i.e. revenue less expenses. The learned DR submitted that considering all these aspects, the CIT (A) was just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited in PD a/c. Therefore, as per Article 283 and 284 of the Constitution of India the deposit in PD a/c belongs to the state and it is not in the nature of Revenue. The amount remitted to PD A/c is the entire sale proceeds and not the surplus. vi) The CIT in a proceeding initiated u/s 263 for the A.Y 2001-02 accepting assessee s contention that payments made to the state will not amount to application of income had dropped the proceedings. vii) State is competent to make retrospective amendment. 19. Before deciding the issues raised by the assessee it is necessary to deal with certain basic facts which have a crucial bearing. The assessee was incorporated under the Companies Act, 1956, on 23-7-1986. The objects of the assessee are set out in Article III(A) (B) of the Memorandum of Association. The main objects of the assessee as per Article III(A) are as under:- 1. To manufacture, purchase, import, export alcohol and all other beverages suitable for human consumption. 2. To undertake bottling/packing of alcohol and other beverages in a suitable manner. 3. To carry on business as sellers, dealers and distributors of alcohol and other beverages either in bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act and AS-22 after taking into account expenditure and income tax payable and thereafter the special privilege fee etc. to be paid to the Commissioner of Prohibition and Excise. The CIT (A) after considering the amended provisions of sections 4A, 4B and 4C of the AP (Regulation of trade in IMFL, foreign Liquor) Act, 1993 held that sec. 4A has not specified any amount. The amount paid is also not collected from the sellers of IMFL which would be evident from the invoices. The amounts were paid out of the funds of the assessee realised from its sales and as per its own calculation. Similarly, though section 4B provides for remitting to the Government in the manner specified by the Government. However, it has not provided the manner of computation. Therefore, computation still needs to be made u/s 23A of the State Excise Act which specifies that the margins after meeting expenditure shall be paid as privilege fees. The CIT (A) therefore held that the department s stand that income tax is an expense as per AS-22 and in commercial sense remains unassailed. The CIT (A) further held that section 4C of the State Excise Act only reaffirms the fact that it is only the profit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see corporation sec. 4B speaks of the amount being realised u/s 4A being the income of the Government to be remitted to the government in the manner specified by the Government. Section 4C provides that amounts paid by the Corporation from 21-7-1993 to the Commissioner Prohibition or Government as privilege fee, special privilege fee etc., in consideration of the privilege conferred on the corporation as per the provision of sections 23(1), 23A and 23B of Excise Act shall be deemed to be the income of the Government. Though the assessee has claimed that the Government fixes the sale price but the fact is privilege fee,special privilege fee etc., have not been specified by the Government in terms of sec. 23A of the Excise Act or as per amended sec. 4A of the Act. This is very much evident from the invoices raised by the assessee which did not specify the details of price charged. In other words, the invoice did not specify the privilege fee, special privilege fee etc.., separately though both sections 23A and 4A provide for specifying such fee. Section 23A of the Act which was the provision providing for payment of margin, privilege fee etc., and which was governing the field at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the amount representing payment to Chief Minister s relief fund as its income and thereafter has claimed deduction u/s 80G of the Act. This itself falsifies the assessee s claim that the entire sale proceed from IMFL is the income of the government. 23. Assessee has contended that wholesale distribution and sale of IMFL undertook by the assessee corporation as an authority on behalf the State in terms of Explanation to section 4 of the Andhra Pradesh Excise Act, 1968 read with section 68A of the Act, hence the income from sale of IMFL is the income of the State, therefore not taxable as per Article 289(1) of the Act. However, as can be seen from the profit and loss account for the impugned assessment year, the entire sale turnover from IMFL has been treated by the assessee as its income. Similarly, on examination of the sales-tax/VAT return , it is to be noted that the assessee is not only showing the entire turnover from sale of IMFL as its turnover but it is also collecting salestax/ VAT on sales effected to the retailers and paying to the government account. Assessment orders have also been passed by the sales-tax authorities assessing the turnover relating to the sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge fee etc. Only after the amount is deposited in the PD account, the Director of Distilleries apportions the receipts under different heads for payment to the government exchequer. These facts coupled with the fact that the sale invoice also does not quantify the privilege fee, special privilege fee etc., makes it clear that the quantification of privilege fee and special privilege fee etc., as per section 23A read with the newly inserted section 4A of the Excise Act has not been made. In these circumstances, the assessee s claim that privilege fee and special privilege fee are considerations for conferring a privilege, hence should be allowed as expenditure is not tenable. On the contrary, the aforesaid GOMS gives an impression that the instructions to deposit the sale proceeds in the PD account are only an internal arrangement. The fact that the Corporation is allowed to operate an over-draft account with a limit of ₹ 100 crore per month proves that the deposit of sale proceeds of liquor made in the PD account is again ploughed back to the assessee in the form of overdraft account. That besides the contention of the assessee that sale proceeds never reaches the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate. Therefore, the income is the income of the State. However, no such principal-agent relationship is discernible in the present appeal before us. The learned AR had also cited the decision of Hon ble Supreme Court in case of State of Kerala and Others vs. Kandath Distilleries judgment dated 22-2-2013 to submit that State under the Constitution of India has the exclusive privilege over trade in liquor. Nobody disputes such right of the State and we respectfully agree with the proposition laid down by the Hon ble Supreme Court but the issue before us is not whether the state has exclusive privilege or not. The issue before us is taxability of income at the hands of the assessee corporation which is distinct and separate from the state. 26. The learned AR has relied upon the judgment of Hon ble Supreme Court in case of Government of Andhra Pradesh vs. Hindustan Machine Tools Ltd. (1975 CTR 164) to submit that state government has power to legislate retrospectively. Though there is no dispute to such proposition of law but the facts involved in that case are clearly distinguishable and inapplicable to the facts of the present case, as we have already held, by the time the new pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 289 makes it clear that they are mutually exclusive and speaks of three different situations. In the present case, admittedly, no tax has been imposed either on the property or income of the State. Article 289(3) would also not apply to the facts of the present case as there is no such declaration by the parliament and therefore the only provision left is Article 289(2) which is applicable to the present case. Though it may be a fact that the assessee corporation is carrying out the wholesale distribution of IMFL as an authority of government or on behalf of government but, that cannot be a reason for claiming immunity from taxation under the provisions of I T ACT in view of Article 289(2) of the Constitution. The contentions raised by the learned AR in the course of hearing as well as in the written submissions in the present appeal have been considered and exhaustively dealt with by the Income-tax Appellate Tribunal, Hyderabad bench in case of AP Housing Board vs. Addl. CIT (ITA Nos. 717, 1216 to 1218/Hyd/2012 Others) dated 31-5-2013. The Tribunal after hearing almost similar arguments put forward by the assessee held as under:- 33. We have considered the elaborate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r grounds. In the meanwhi le, assessment for the AY 2007-08 and 2008-09 were also completed and the assessee s appeal against the assessment orders were pending before the CIT(A). It wi ll be pertinent to mention here that for the AY 2007-08 and 2008-09 also the assessee had fi led its return of income declaring income under the head income from house property and income from other sources and for the assessment year 2007-08 claimed deduction u/s 80-IB of the IT Act. After the retrospective amendment effected in the year 2010 to the APHB Act by introduction of sub-section (7) of section 58 of the APHB Act, the assessee claimed that the income earned by it is the income of the State. 36. From the aforesaid narration of fact, it is very much clear that, but, for the amendment to the APHB Act made by the state legislature in the year 2010 the assessee al l along had been voluntarily fi ling its return of income by recognizing its income. It is also a fact that the assessee al l along was claiming deduction u/s 80-IB of the Act. Only after the amendment to section 58 of the APHB Act, was made the assessee made a claim that its income is not taxable under the IT Act, by claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and land are provided by the Government and any surplus over the expenditure is incurred for the purposes of the Act vests in the consol idated fund of the state. Though APHB enters into contract in its own name but in effect it is doing so on behalf of the state. In law of agency what is to be seen is whether the profit or loss arising in the course of the dealing of the agent accrues to the principal and not to the agent. 37. The learned counsel for the assessee taking us through various provisions of the APHB Act,1956 had submitted that the State Government exercises pervasive control over the Board. To emphasize such contention he referred to the transfer order of one Shri G. Sai Prasad and appointment of law officer. He submitted that the Board cannot take any decision on its own but every action of the Board has to be with the approval of the Government. In this context the learned counsel referred to the minutes of meeting held in the chamber of the chief minister. He further submitted that Rajiv Gruha Kalpa scheme is a scheme of the State Government and the Board is only implementing it as an agency of the Government. He further submitted that for mobilizing resources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onality of its own and this personality is distinct from that of the State or other shareholders. It cannot be said that a shareholder owns the property of the corporation or carries on the business with which the corporation is concerned. The doctrine that a corporation has a separate legal entity of its own is so firmly rooted in our notions derived from common law that it is hardly necessary to deal with it elaborately; and so, prima facie, the income derived by the appellant from its trading activity cannot be claimed by the State which is one of the shareholders of the corporation. 39. The Hon ble Supreme Court after analyzing the different clauses of Article 289(1) in the context of the claim made by the assessee held as under: The main point which we are examining at this stage: is the income derived by the appellant from its trading activity, income of the State under article 289(1) ? In our opinion, the answer to this question must be in the negative. Far from making any provision which would make the income of the corporation the income of the State, all the relevant provisions emphatically bring out the separate personality of the corporation and proceed on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), and if that is so, the facts that the trading activity carried on by the appellant may be covered by article 289(2) does not really assist the appellant s case. Even if a trading activity falls under clause (2) of article 289, it can sustain a claim for exemption from Union taxation only if it is shown that the income derived from the said trading activity is the income of the State. That is how ultimately, the crux of the problem is to determine whether the income in question is the income of the State, and on this vital test, the appellant fails. 40. Even though the learned AR has tried to impress upon us that the Assessee Board is nothing but an extended arm of the Government or part of the Government, but, in our view, it is not so. Sub-section (2) of Section 3 of the APHB Act, 1956 reads as under: The Board shall be a body corporate having perpetual succession and a common seal and may sue and be sued in its corporate name and shall be competent to acquire and hold property both moveable and immoveable and to contract and do all things necessary for the purpose of this Act. 41. A reading of the aforesaid provision makes it clear that the assessee is a body corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2010 by introducing sub-section (7) with retrospective effect from 01/04/2002. The newly introduced sub-section (7) provides that the surplus net revenue after meeting the expenditure of the Board shall vest in consolidated fund of the State of Andhra Pradesh. Section 59 of the Act as it stood earlier provided that al l property, the Board fund and al l other assets vesting in the Board shall be held and applied by it, subject to the provisions and for the purposes of the Act. However, the earlier section 59 was substituted by a new section 59 by Act No. 12 of 2010 with retrospective effect from 01/04/2002. The amended section 59 reads as under: 59. Application of the fund: subject to the provisions contained in sub-section (7) of section 58 all property, the Board fund and all other assets vesting in the Board shall be held and applied by it, subject to the provisions and for the purposes of this Act. Section 81 of the Act empowers the Government to dissolve the Board. 42. On going through the aforesaid provisions it becomes clear that the Board has an independent identity distinct from the State Government. The Board is also constituted for the purpose of carrying out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es pointed out by Mr. Thakar shows at all that the board is a department of the State Government or is its agent and even the provisions of section 32A dones not indicate that. Under that section all moneys recoverable by the board under the Act or under any agreement are declared to be recoverable as arrears of land revenue and Mr. Thakar urged that this provision showed that the board will have to be regarded as recoveries of the State Government, otherwise these would not have been made recoverable as arrears of land revenue. In our view, it is not possible to accept this submission of Mr. Thakar, for, all that section 32A provides for is merely indicate a mode a recovery and simply because a particular mode of recovery which is generally available to the State Government for making its recoveries has been made available to the board for making its recoveries, it cannot mean that the said recoveries becomes recoveries of the State Government or that the recoveries made by adopting that particular mode become recoveries made by the board for and on behalf of the State Government. Similarly, the provision under which the board has been deemed to be a local authority for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various activities for and on behalf of the Government, no provision would have been made enabling the board to borrow loans from the State Government or to pay interest thereon to the State Government, for, it is inconceivable that a party would by interest to itself. This provision, in our view, is a clear pointer to the fact that the Board is a distinct entity apart from the State Government and not department or an agent of the State Government. On the other hand, this provision clearly suggests that the board is a separate entity, possesses its own property, assets or funds and undertakes the various activities on its own account. The other provision which, in our view, is of a clinching character is the one to be found in section 40(2) of the Act. That provision indicates as to what should happen to the property and assets of the board upon its dissolution being made by the State Government. Under sub-clause (a) of sub-section (2) of section 40 it is provided that with effect from the date specified in the notification under sub-section (1), all properties, funds and dues which are vested in or realizable by the board shall vest in and be realizable by the State Government. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble Bombay High Court while coming to such conclusion also followed the ratio laid down by the Hon ble Supreme Court in case of APSRTC V/s. ITO (supra) and held as under: 15. In this context it would not be out of place to refer to the judgment of the Supreme Court in the case of Andhra Pradesh State Road Transport Corporation v. Income-tax Officer. In that case a similar question based on the provisions of the article 289(1) of the Constitution was raised and immunity from Union taxation thereunder was claimed by the Andhra Pradesh State Road Transport Corporation, and on an examination of the relevant provisions of the Road Transport Corporation Act, 1950, under which the Andhra Pradesh State Road Transport Corporation was constituted the court came to the conclusion that the trading or business activity that was being carried on by the Andhra Pradesh State Road Transport Corporation was not carried on by that corporation either as department of the State Government or as an agent on behalf of the State Government, but the corporation indulged in concerned trade or business activity on its own and it was held that the immunity claimed by that corporation under article 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any sense of the term; further, it was pointed out that since profit motive was absent in the instant case before us, there was no question of making any provision for making over surplus receipts to the State Government which was feature which appeared clear under section 30 of the Road Transport Corporations Act, 1950. In the first place, in spite of the aforesaid peculiar features which obtained under the Road Transport Corporations Act, 1950, the Supreme Court took the view that the A. P. State Road Transport Corporation was distinct entity. Secondly, as stated earlier, the distinguishing features mentioned by Mr. Thakar may be relevant on the point of attracting the exemption under section 4(3)(i) and not on the issue which has been raised. The principal question involved both in that decision as well as in the case before us has been whether the income and the property of the board could be regarded as the income and property of the State Government and on that question the provisions of the Madhya Pradesh Housing Board Act, 1950, especially provisions of sections 3, 4, 12 and 14, clinchingly indicate that the petitioner-board cannot be regarded as department or an agent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B Act by way of an amendment in 2010 giving retrospective effect from 2002, which provided for vesting of the surplus fund in consol idated fund of the state Government it cannot be said that the income earned by the assessee is actual ly the income of the state Government. In fact a similar provision u/s 30 of the APSRTC Act, provided for vesting of the surplus fund with the State Govt. In spite of such provision, the Hon ble Supreme Court held that APSRTC is a distinct statutory corporation and the property and income of APSRTC is not the income of the State. 45. The chargeability of the income to tax is as per the charging section contained u/s 4 of the IT Act, 1961. The retrospective amendment made to the APHB Act by Act 12 of 2010 cannot dilute the effect of the provisions contained under the income-tax Act, which is an Act of the Parliament hence has overriding effect over an Act of the State Legislature. It is a fact on record that the plea taken by the assessee that Board s income is the income of the state Government was not there until introduction of sub-section (7) to section 58 of the APHB Act in 2010. That is the reason the assessee had never taken this stand all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down is in the context of chargeability of income under the Income-tax Act vis- -vis Article 289(1) of the Constitution of India. Therefore, though there is no dispute with regard to the ratio laid down in those decisions, however, they are not applicable to the facts of the case of the assessee. It will be pertinent to mention here that the learned AR placed strong reliance upon the judgment of Hon ble Supreme Court in case of Housing Board of Haryana Vs. Haryana Housing Board Employees Union and Others [1996] 1 SCC 95. In this context, the learned AR drawing a parallel between the provisions of Haryana Housing Board Act, 1971 and APHB Act, 1956 submitted that the Hon ble Supreme Court on considering the provisions of Haryana Housing Board Act has held that the control of the Government is so pervasive that the Board does not have even a semblance of independence. It was submitted that in assessee s case also due to the control of the State Government the assessee does not have any independent existence. The aforesaid decision of the Hon ble Apex Court is not applicable to the assessee firstly because the observation made by the Hon ble Supreme Court was in the context of whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income by overriding title. In CfT vs. Nizam Sugar Factory Ltd. (2002) 253 fTR 68 (AP), under Molasses Control Order, 1972, one third of the sale price of molasses was required to be set apart from construction of storage tanks. The amount was claimed by the assessee as not taxable having been diverted by overriding title under the authority of the law. The High Court found that the assessee had no control over the fund, and the same was diverted from the source and did not reach it. Therefore, it was not taxable. Similar view was taken in the following cases: SomaiyaOrgeno-Chemicals Ltd. vs. CIT (1995) 216 ITR 291 CIT vs. New Horizon Sugar Mills (P) Ltd. (2003) 128 Taxman 300 (Mad) : (2000) 244 ITR 738 (Mad) Commissioner of' Incometax vs. PandavapuraSahakaraSakkareKharkane Ltd, (1992) 198 ITR 690 (Kar.) In CIT vs. New Horizon Sugar Mi lls P. Ltd., (2004) 269 ITR 397 (SC) and CIT vs. Ambur Co-op. Sugar Mills Ltd., (2004) 269 ITR 398 (SC), the Supreme Court has dismissed civil appeals by the Revenue on this issue. It should be noted that in all these cases, there was no plea the amount was taxable on the ground that Income Tax Act will prevail over the Mola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government. It further provides that such surplus revenue shall be transferred to the state Government of AP on quarterly basis as per the instruction or advice of the Government. Therefore, so far as the accrual of income is concerned, there is no dispute to the fact that the income has already accrued to the assessee. Only after the accrual of income to the assessee the surplus has been diverted to the Government account. The Hon ble Supreme Court in case of CIT V/s. Sri Sitaldas Tirathdas, 41 ITR 367 (SC) held as follows: There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke this wholly owned government body an organization with profit motive. This aspect has also been explained in detail in the rejoinder on the remand report of A.O. with supportive case laws. Funding of the infrastructure created by the A.P. State Housing Corporation at the behest of State Government is incidental to the main activity of the appellant. It did directly benefit from this expenditure as such infrastructure was meant for the houses sold by it. Its existence and purpose are served as long as it plays direct or indirect role in dealing with and satisfying the need of housing accommodation in the State. The expenditure in question is in course of its normal business operation which, though, had not taken place previously. The appellant is working in a dynamic socio-economic environment and keeping in view the changing need the necessity of such expenditure had arisen. In the earlier proceedings, the A.O. and CIT(A) have wrongly concluded that the amount paid to A.P. State Housing Corporation under the order of the State Government was capital expenditure. Development of housing facility is the purpose for which the appellant has been constituted. The State Government h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory for its workmen and movement of goods. The High Court held that the assessee did not acquire any ownership over the bridge and there was no addition to the value of the assets owned by it. Therefore, the payment made to the Government was revenue expenditure. In Navsari Cotton and Silk Mills Ltd. (1982) 135 ITR 546 (Guj.), the assessee discharged an effluent causing health hazard, which was protested by the citizens of the area. Apprehending a spate of suits therefrom, and in view of the Municipality being unable to remedy the situation, and prevent litigation, the assessee made contribution to the Municipality for providing underground pipeline through the municipal land for disposal of effluents. It was argued that the purpose of this expenditure was to avoid losing market, customers and goodwill. The High Court accepted this and held that the expenditure was allowable under section 37 the LT. Act. In Joint Commissioner of Income Tax vs. Deverson Industries Ltd. (2007) 290ITR (A.T.) 287 (ITAT - Ahm), the assessee had paid an amount to the State Government to help villagers affected by effluent discharged from the assessee's factories and such amounts were paid to Municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations is statutory in character, the directions issued by the State of Gujarat in exercise of its statutory powers under S.82 cannot be said to be in any way inconsistent with this regulation. The second reason is that under S.82 of the Act, the State of Gujarat is entitled to give directions to the Housing Board for the purposes of the Act and if these directions are not found to be arbitrary or illegal, they are binding on the Housing Board and they would supersede any of the earlier contrary decisions of the Housing Board and impose a special obligation on the Housing Board to comply with such directions. As seen earlier, by S.24 of the Act, it is the duty of the Housing Board to incur expenditure and undertake works of such housing schemes as it may consider necessary from time to time, subject to the control of the State Government. Thus, control of the State Government is all pervasive in connection with any of the housing schemes undertaken by the Board. Thus, the payment to A.P. State Housing Corporation was done in the manner prescribed in the A.P. Housing Board Act, under which the appellant has been constituted. Therefore, such payment is part and parcel of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to take into account the submissions made and rulings relied upon by the appellant in the present proceeding. In this process, some errors have crept into the appeal order: i. At paragraph 6.17 of the appeal order for A.Y.2008-09, the CIT(A) has, mentioned that Government orders quoted by the appellant does not in any way indicate that any money is to be paid to the State Government in lieu of lands provided. But the CIT(A) has missed out the content of the letter dated 23.12.2005 from the Government of Andhra Pradesh, extracted by him at page 39 of his order. The heading of this letter states Utilisation of an amount to the extent of value of Government lands to be paid to the Government by the APHB for infrastructure development of Rajiv GruhaKalpa . At paragraph 3 in this letter, it is stated that infrastructure cost up to the extent of value of land to be paid to the Government by the APHB will be utilised for infrastructure development under Rajiv GruhaKalpa scheme. In the event of shortfall, the Government will allot additional land to APHB. Further, in the Minutes of Meeting held in chamber of Hon 'ble Chief Minister, extracted at page 41 of the order of the CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) has given the finding that APHB is controlling its own affairs and is independent in entering into contracts and taking loans. Therefore, in paragraph 5.8.1 and 5.8.2, he has argued that APHB is not functioning as an agent of the State Government. He has not referred to section 21 of the APHB Act, which clearly states that subject to the control of the Government, Board may incur expenditure and undertake works for framing and execution of housing schemes. Section 60 allows APHB the freedom to incur expenditure not exceeding ₹ 10,0001- in extreme urgency, which is not included in the annual programme sanctioned by the Government. Section 62(1) permits APHB from time to time, with the previous sanction of the Government and subject to the provisions of the APHB Act and to such conditions as may be prescribed in this behalf, burrow any sum required for the purpose of the Act. Section 79 empowers the State Government to give direction to APHB and overrule any decision or order of it. These provisions, severely restricting the freedom to operate, spend, enter into contracts and borrow money have not been referred to or discussed in the order of the CIT(A). 55. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually distinguishable as in those cases there was nexus between the expenditure incurred and the business of the assessee. Therefore, in our view the revenue authorities were correct in disallowing such expenditure. 27. Though the learned AR had submitted that the ratio laid down in case of APHB(supra) would not be applicable to the facts of assessee s case in view of factual difference, but on deeper examination, we are of the view that principles decided therein would also apply to the facts of the present case. In aforesaid view of the matter, all the contentions of the assessee with regard to non taxability of the amount paid towards privilege fee and special privilege fee etc., fails. The assessee has also assailed the order passed by the CIT (A) by contending that since the Tribunal had directed the CIT (A) only to consider the amendment she was not competent to the validity of amendment. However, such contention of the learned AR is not acceptable. Even if we accept that the CIT (A) is not competent to go into the validity of the amendment but it has no direct bearing on the ultimate conclusion reached by her. The assessee has raised a further ground that the CIT has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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