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TMI Blog2024 (1) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment was framed by the Assessing Officer, National Faceless Assessment Centre, Delhi for the assessment year 2015-16 u/s. 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter the Act ), vide order dated 28.09.2021. 2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made by the AO by invoking the provisions of section 40(a)(iib) of the Act being VAT in the nature of any other fee or charge . For this, Revenue has raised the following three grounds:- 1. The order of the learned ld.CIT(A) is contrary to law and facts and circumstances of the case. 2. The ld.CIT(A) has erred in following the decision of the Hon ble ITAT in the assessee s own case for the A.Y. 2014-15, without appreciating the fact that the said order was not accepted by the Revenue further appeal against the said order was filed by the Revenue. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld.CIT(A) be set aside and that of the Assessing Officer be restored. 3. Brief facts are that the assessee is a government of Tamil Nadu undertaking engaged in the business of wholesale / retail vending in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 40(a)(iib)(A) or Section 40(a)(iib)(B), as such they are not deductible. Broadly these levies can be divided into three categories. Gallonage fee, licence fee and shoprental (kist) are in the nature of fee imposed under the Abkari Act of 1902. These are the fees payable for the licences issued under FL-9 and FL-1. In the impugned order, the High Court has held that the gallonage fee, licence fee and shop rental (kist) with respect to FL-9 licence are not deductible, as it is an exclusive levy on the Corporation. Further a distinction is drawn from FL-1 licence from FL-9 licence, to apply Section 40(a)(iib), only on the ground that, FL-1 licences are issued not only to the appellant/KSBC but also issued to one other Government Undertaking, i.e., Kerala State Co-operatives Consumers Federation Ltd. High Court has held that as there is no other player holding licences under FL-9 like KSBC as such the word exclusivity used in Section 40(a)(iib) attract such amounts. At the same time only on the ground that FL-1 licences are issued not only to the KSBC but also to Kerala State Co-operatives Consumers Federation Ltd., High Court has held that exclusivity is lost so as to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Undertaking, the statutory fees etc., viz., gallonage fees, licence fee and shop rental (kist) are payable by the appellant-Undertaking, i.e., KSBC.Once the State Government Undertaking takes licence, the statutory levies referred above are on the Government Undertaking because it is granted licences. Therefore, we are of the view that the finding of the High Court that gallonage fee, licence fee and shop rental (kist) so far as FL-1licences are concerned, is not attracted by Section 40(a)(iib), cannot be accepted and such finding of the High Court runs contrary to object and intention behind the legislation. 14.2. Further, because another State Government Undertaking, i.e., Kerala State Co-operatives Consumers Federation Ltd. was also granted licences during the relevant years, as such exclusivity mentioned in Section 40(a)(iib) is lost, also cannot be accepted, for the reason that exclusivity is to be considered with reference to nature of licence and not on number of State owned Undertakings. If the interpretation, as held by the High Court, is accepted, the legislative intent can be defeated by issuing licences in FL-1 to several State Government Undertakings and then make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se taxes. (1) The tax payable under sub section (1) of section 5 of the Kerala General Sales Tax Act, 1963, by a dealer in foreign liquor shall be increased by a surcharge at the rate of ten per cent, and the provisions of the Kerala General Sales Tax Act 1963 shall apply in relation to the said surcharge as they apply in relation to the tax payable under the said Act. Provided that where in respect of declared goods as defined in clause (c) of section 2 of the Central Sales Tax Act, 1956 the tax payable by such dealer under the Kerala General Sales Tax Act, 1963 together with the surcharge payable under this sub section, exceeds four per centum of the sale or purchase price, the rate of surcharge in respect of such goods shall be reduced to such an extent that the tax and the surcharge together shall not exceed four per centum of the sale or purchase price. Section 5(1)(b) of the Kerala General Sales Tax Act, 1963 reads as under : 5. Levy of tax on sale or purchase of goods: (1) Every dealer (other than a casual trader or agent of a nonresident dealer or the Central Government, or Government of Kerala or the Government of any other state or of any Union Territory, or any local aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndorse the view of the High Court that surcharge on land revenue payable under the Surcharge Act is not land revenue but a levy which is distinct from land revenue. In consonance with the law laid down by this Court in Vishwesha Thirtha Swamiar case [(1972) 3 SCC 246 : (1972) 1 SCR 137 : AIR 1971 SC 2377] it must be held that the surcharge on land revenue levied under the Surcharge Act, being an enhancement of the land revenue, is part of the land revenue and has to be treated as such for the purpose of assessing compensation under Section 12 of the Ceiling Act. 14.5. Further, CBDT itself has issued circular in Circular No. 3/2018 which is issued, as a measure for reducing litigation, by revision of monetary limits for filing appeals by the Department before the Incometax Appellate Tribunal, High Courts and SLP/appeals before this Court. In the said circular it is clearly mentioned that for considering tax effect it includes applicable surcharge and cess. Same will also strengthen the stand of the assessee. Thus it is clear that the surcharge which is sought to be levied is nothing but the enhancement of sales tax, which is levied under Section 5(1) of the KGST Act. When the basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Section 40(a)(iib)(B) also cannot be accepted for the reason that wherever the Parliament intended to include tax, referred clearly to taxes clearly in the very Section 40. That itself indicates that the surcharge or tax were never intended to be included in the net of amended Section 40(a)(iib)(A) or 40(a)(iib)(B) of the Income-tax Act, 1961. 15. So far as turnover tax is concerned it is submitted by the learned ASG appearing for the revenue that such tax was imposed not only on KSBC in terms of Section 5(1)(b) of KGST Act, but it is imposed on various other retail dealers specified under Section 5(2) of the said Act. Further turnover tax is also a tax. The very same reason which we have assigned above for surcharge, equally apply to the turnover tax also. As such turnover tax is also outside the purview of Section 40(a) (iib)(A) and 40(a)(iib)(B). 16. For the aforesaid reasons, we hold that the gallonage fee, licence fee and shop rental (kist) with respect to FL 9 and FL 1 licences granted to the appellant will, squarely fall within the purview of Section 40(a)(iib) of the Income-tax Act, 1961. The surcharge on sales tax and turnover tax, is not a fee or charge coming within th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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