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2019 (3) TMI 1772 - AT - Income TaxRevision u/s 263 - Disallowance u/s 40(a)(iib) on Surcharge on Sales Tax and Turn over Tax - HELD THAT:- In the present case, the Assessing Officer had not made the disallowance u/s. 40(a)(iib) - Without enquiring, AO accepted the assessee’s claim. The failure on the part of the Assessing Officer to make necessary enquiry rendered the assessment order erroneous which also resulted in loss to the revenue. CIT had observed in his order that the surcharge on sales tax and turn over tax was not disallowed by the Assessing Officer u/s. 40(a)(iib) of the Act. Hence, the order of the CIT cannot be held as erroneous. The CIT’s approach was correct - CIT exercised his power conferred u/s. 263 in setting aside the assessment. AO has not considered the issue relating to the application of section 40(a)(iib) of the Act and he had accepted the claim without applying his mind - order of the AO is erroneous in so far as it is prejudicial to the interests of the revenue. In our opinion, the CIT is justified in invoking the provisions of section 263 - Decided against assessee. Disallowance of gallonage fee expenses u/s. 40(a)(iib) - HELD THAT:- The clause “exclusively” cannot be assessed with respect to the nomenclature of the payment made but the same has to be determined with respect to mode and method of levy of charge. The gallonage fee is paid by the assessee as per the Foreign Liquor Rules, 1953 under Rule 15A. The gallonage fee referred under Rule 15A is with regard to fee to be paid for FL-9 licensee. The FL-9 license is exclusively granted to the assessee. Therefore, the gallonage fee paid by the assessee is covered by the provisions of section 40(a)(iib) - The fact that a fee in the name of gallonage fee is also levied under clause 14 of Kerala Rectified Spirit Rules, 1972 is not relevant for the purpose of examining the applicability of provisions of section 40(a)(iib) of the Act for the fee paid under Foreign Liquour Rules, 1953.. Therefore in view of the above reasons, the disallowance of gallongage fee of ₹ 54,83,87,000/- u/s. 40(a)(iib) of the Act is upheld. This ground of appeal of the assessee is dismissed. Disallowance of license fee and shop rental u/s. 40(a)(iib) - AR submitted that the provisions of section 40(a)(iib) of the Act are not applicable to license fee and shop rent paid by the assessee - HELD THAT:- Language used by legislature used the sentence is "any fee or charge which is levied exclusively on a State Government undertaking by the State Government" but not the sentence "any fee or charge which is levied exclusively on the assessee by the State Government". Any fee or charge which is exclusively levied only on State Government undertakings by the State Government is covered by the provisions of section 40(a)(iib) - Hence, even considering hypothetically that Shop rental was payable by another state government undertaking also, the nature of the payment remains "exclusive" for the purpose of section 40(a)(iia) - we hold that there is no merit in the grounds raised by the assessee on the issue of disallowance of license fee and Shop rental and therefore, the same are dismissed. - Decided against assessee.
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