Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2016 (3) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (3) TMI 461 - KARNATAKA HIGH COURTDisallowance of Privilege fee paid u/s 40(a)(ii) or (iib) - sharing of revenue with the state - scope of any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains - Scope of any amount (A) paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on; or (B) which is appropriated, directly or indirectly, from, a State Government undertaking by the State Government. - disallowance with effect from Assessment year 2014-15 or prior to that. - Held that:- The privilege fee payable by the petitioner to the State Government would be taxable with effect from 1.4.2014 and not prior thereto. The unreasonableness of the privilege fee payable is also not a ground to hold that it is a device by which the petitioner and the State Government are avoiding payment of tax. In this regard, reliance is placed on Har Shankar [1975 (1) TMI 89 - SUPREME COURT] which is clear on this aspect and therefore, it was not open for the Assessing Officer to opine that privilege fee appears to be relatable to the profit earned and a large chunk of it is transferred to the State Government in the name of privilege fee. It is settled law that there is no illegality committed by the petitioner in paying such privilege fee on the State Government having fixed such privilege fee. There is no legal prohibition in this regard and therefore, it cannot be said that the same could have been disallowed by the Assessing Officer. It requires to be emphasized that the Supreme Court in Har Shankar [1975 (1) TMI 89 - SUPREME COURT] has expressed that, 'the power of the Government to charge a price for parting with its rights and not the mode of fixing the price is what constitutes the essence in the exercise of the matter', are the words used by the Supreme Court in dealing with the privilege of the State Government to fix such a privilege fee. Therefore, it would aptly apply in the facts and circumstances of these cases insofar as the Assessing Officer having expressed an opinion of the State Government having exercised its power "unscientifically, illegally and irrationally". (sic) Consequently, these petitions are allowed. The impugned assessments are set aside insofar as it treats the privilege fee paid as being taxable to income. - Decided in favour of assessee
|