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I-T - Levy of same fees on identical assessees placed on similar footing, is no basis to judge exclusivity of such levy in terms of Section 40(a)(iib): HC


By TIOL News Service

ERNAKULAM, JUNE 13, 2018: THE ISSUE BEFORE THE HIGH COURT IS - Whether levy of same fees/charges on identical assessees placed on same footing, is no basis to judge exclusivity of such levy in terms of Section 40(a)(iib). YES IS THE VERDICT.

Facts of the case:

The assessee company is engaged in the business of Indian made foreign liquor. For the relevant A.Y, the self assessment in the case of assessee was completed after disallowing the deductions claimed by assessee towards (i) Gallonage fee amounting to Rs.54,83,87,000/-, (ii) Licence fee amounting to Rs.5,75,000/-, (iii) Shop license fee amounting to Rs.199,71,00,000/- and (iv) Surcharge on sales tax amounting to Rs.551,61,01,115/-, on the ground that they were exclusive levies on the assessee by the State Government. The assessee contended that such levies were not exclusive levies falling within the scope of Section 40(a)(iib) and therefore, the AO was not justified in disallowing the deductions made on such heads. On appeal, the FAA granted a conditional stay for entertaining the grounds of assessee.

High Court held that,

++ the question that arises for consideration is whether the FAA is justified in imposing condition while granting the stay sought by the assessee. It was contended by assessee that they have the monopoly in the wholesale business of Indian Made Foreign Liquor and beer in the State and they are carrying on the said business on the strength of license issued by the competent authority under the Foreign Liquor Rules. The deduction of Rs.5,75,000/- claimed by assessee which was disallowed, is the licence fee levied exclusively on the assessee by the State Government for the licence issued to them in respect of 23 warehouses. Rule 15A of the Foreign Liquor Rules provides that Gallonage fee at such a rate as the Government may prescribe from time to time shall be paid by the FL-9 licensee on the quantity of Indian made Foreign Liquor sold by such licensee. It is also seen that Gallonage fee of Rs.54,83,87,000/- deducted by assessee which was disallowed, is the fee levied on the assessee exclusively by the State Government under Rule 15A on the quantity of Indian made Foreign Liquor sold by assessee on the strength of the FL-9 licence exclusively granted to them. In so far as FL-9 license is issued in the State under the Foreign Liquor Rules, only to the assessee, in view of the monopoly created in their favour by the State Government, it cannot be contended that the said levies are not exclusive levies on the assessee by the State Government;

++ coming to the remaining deductions which are disallowed, the specific case of the assessee is that the same are levies applicable to others as well. For instance, as far as the shop rental is concerned, it is the case of assessee that retail sale of foreign liquour in the State is not being carried on exclusively by the assessee, but also by the Kerala State Co-operative Consumer Federation Limited also. A reading of Section 40(a)(iib) 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. Looking at the facts in the said perspective, there is no doubt that two views are possible in the matter and the appellate authority cannot therefore be found fault with for having imposed the impugned condition.

(See 2018-TIOL-1108-HC-KERALA-IT)