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TMI Blog2020 (11) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years and nor before the Tribunal during arguments of assessment year 2014-15. In view of above, the assessee cannot be allowed to make a new case and to argue the contentions which were not pressed into service before the authorities below and before the Tribunal during the hearing of the case of A.Y. 2014- 15 at this belated stage. Therefore, these contentions of the assessee are dismissed. - ITA No. 03/CTK/2019 - - - Dated:- 23-11-2020 - SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU , ACCOUNTANT MEMBER Assessee by : Shri Ved Jain, AR Revenue by : Shri M.K.Gautam CIT, DR ORDER Per C. M. Garg , JM This is an appeal filed by the assessee against the order of the CIT(A),1, Bhubaneswar dated 19.12.2018 for the assessment year 2015-16. 2. Grounds of appeal raised are as under: 1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming disallowance of ₹ 151,90,00,000/- made by the AO under section 40(a)(iib)of the Act on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee cannot be taxed. However, the Assessing Officer did not accept the explanation of the assessee and made disallowance invoking the provisions of section 40(a)(iiib) of the Act. 5. On appeal, the CIT(A) confirmed the action of the Assessing Officer. Hence, this appeal by the assessee. 6. We have heard the rival submissions, inter alia, impugned assessment order, first appellate order, paper book of the assessee spread over 123 pages, written synopsis and entire material placed on record of the Tribunal. 7. Ld Authorised Representative of the assessee (AR) submitted that the CIT(A) has grossly erred, both on facts and in law, in confirming disallowance of ₹ 151,90,00,000/- made by the AO under section 40(a)(iib)of the Income tax Act, 1961 (in short the Act ) on account of license fees paid to the Govt, of Odisha. Ld AR submitted that the CIT(A) was not correct and justified in rejecting the contention of the assessee that since license fee is exclusively not levied on the assessee, thus, provisions of clause (iib) of section 40(a) of the Act are not applicable to the impugned payment. Ld AR vehemently pointed out that the authorities below were not cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight of the State Government to undertake under the Constitution of India, which it is willing to part with in lieu of such charges. The assessee has acquired right to carry on the wholesale liquor trade and it is for acquisition of such right that it is required to pay the license fees as per the Odisha Excise Act, 2005 read with the Excise Notification dated 23.03.2013 issued to prescribe the license fee for the year under consideration. 4. It is pertinent to note here that whosoever is engaged in any business (trade, manufacture, retailers, etc.) in relation to intoxicating liguor is required to pay the prescribed license fees to the State Government in order to acquire the license and to be able to carry such business. The same is evident from perusal of the Excise Notification [PB page no 66-80]. Such notification prescribes the license fees for any and every kind of business in relation to liquor and is mandatorily to be paid. There is a license fee recovered from Bar Hotels, license from Sea Men's and Marine Officers' Club, License from Clubs, License for sale of medicated Wines/Medicines, License for Bar, Wine Parlour, License for Beer shop, License for Beer P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect has not been dealt by the Hon'ble ITAT. 8. Further, the Hon'ble ITAT also did not consider that the intention behind inserting section 40(a)(iib), as explicitly revealed from memorandum and Explanatory Notes to Finance Act, 2013, is to curb tax avoidance practices in the form of appropriation of surplus by state government undertaking to the State Government. The relevant extract of the Memorandum in this regard is produced below for sake of ready reference: Disallowance of certain fee, charge, etc. in the case of State Government Undertakings. The existing provisions of section 40 specifies the amounts which shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession , The nondeductible expense under the said section also includes statutory dues like fringe benefit tax, income-tax, wealth-tax, etc. Disputes have arisen in respect of income-tax assessment of some State Government undertakings as to whether any sum paid by way of privilege fee, license fee, royalty, etc. levied or charged by the State Government exclusively on its undertakings are deductible or not for the purposes of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, the provisions of section 40(a)(iib) are not warranted. No finding was given on the said aspect by the Hon'ble ITAT in the order. 12. Further, importantly, license fees are being charged by the State Government at the beginning of the Financial Year and is charged to the Profit and Loss account of the assessee. The same is also considered while pricing the product. Thus, the income and margin earned by the assessee is after taking into account such license fees, which is also evident from the fact that despite payment of such license fees, the assessee company has reported huge taxable income of ₹ 83.22 crores in AY 2014-15 and ₹ 72.66 crores (GTI) in AY 2015-16. Such argument has also not been considered in the preceding year's order. The said fact corroborates that there is no shifting of tax base. 13. In light of the above, it is submitted that the case of the assessee is not that of exclusive levy imposed by government on such undertaking in the name of license fee so as to appropriate/divert any taxable profit. In fact, the assessee has paid genuine fee for obtaining license of business, which would have been equally collected f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs when it so charges an amount to part with its rights from non-State Government Undertakings as well. The levy has to be exclusive to attract the provision of section 40(a)(iib). 19. It is submitted that merely because an amount is paid by a State Government Undertaking to State Government, the said amount does not become an exclusive levy. The intention of the legislation is to disallow amount paid as exclusive levy or to appropriate profits and not to disallow any amount paid by State Government Undertakings to State Governments merely because State Government are stakeholders in State Government Undertakings. 20. It is a well settled principle in the law that the company is a juristic person with distinct and separate legal entity from the shareholders. The entity of a company is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration i.e. the assessee. Thus, the rigour of provisions of sub-clause(iib) of clause (a) of section 40 of the Act is to be triggered against the assessee as the assessee by way of license fee of wholesale distribution of liquor has paid the impugned amount and the same has been levied on the assessee exclusively as there is no other wholesaler of liquor in the state of Odisha. Ld D.R. supporting the assessment order submitted that on going through the guidelines issued by the Excise Department of Government of Odisha alongwith the provisions of section 40(a)(iib) of the Act, it can be easily gathered that this provision is applicable for any amount which is paid by way of license fees or charge which is levied exclusively on the State Government Undertaking by State Government or which is appropriated directly or indirectly from the State Government Undertaking by the State Government. Therefore, the CIT(A) was right in confirming the disallowance by holding that the impugned license fee paid by the assessee to the State Government which clearly in the nature of payments specified u/s.40(a)(iib) of the Act w.e.f. 1.4.2014. Ld CIT DR finally prayed that the assessment as well as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement of excise shops and establishment for financial year 2013-14 pertaining to assessment year 2014-15 (assessee s paper book 77-92) clause (18) clearly reveals that the wholesale distribution of foreign liquor, IMFL and country liquor has been exclusively assigned to the assessee on payment of license fee of ₹ 100 crores per annum. 17. Ld A.R. did not controvert the fact that there is no other wholesaler of foreign liquor, IMFL and country liquor in the State of Odisha and the assessee has exclusive right to undertake wholesale liquor business in the State of Odisha without any competitor. 18. At the cost of repetition, we may point out that in clause (18) of guidelines of Excise Department of Government of Odisha makes it clear that the assessee is the exclusive wholesaler of all kind of liquor in the State of Odisha. Therefore, the other contentions of ld A.R. are not tenable that provisions of sub-clause (iib) of clause (a) of section 40 of the Act is not applicable to the assessee for making disallowance the impugned payment of license fee. In the totality of facts and circumstances of the case, as noted above, we are satisfied that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee and, therefore, by no stretch of imagination can the entire amount paid as license fee be considered to be disallowed under section 40(a)(iib) of the Act. 18. Ld counsel during the arguments, pressing into service with reference to these contentions, submitted that the case may kindly be remitted to the file of the AO for determination of license fee comparing with the license fee paid by other licensees and the assessee should be allowed to claim such amount of license fees, which is reasonable and applicable in view of the license fee paid by other similar liquor wholesalers. 19. On these contentions, ld CIT DR vehemently pointed out that the assessee is the only wholesale distributor of liquor authorized by Government of Odisha and there is no other licensees in the similar line of business. Therefore, no comparable case is applicable. He also pointed out that the contentions of the assessee at paras 16 to 24 have not been raised by the assessee during earlier appeal or before the authorities below during assessment and first appellate proceedings for assessment year 2014-15 and also 2015-16, hence, the assessee could not be allowed to make a new case before the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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