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2020 (5) TMI 176 - HC - Income TaxDisallowance u/s 40 (a) (iib) - payment of Gallonage Fee, Licence fee, Shop rental (Kist) and Surcharge on Sales Tax - HELD THAT:- Gallonage Fee - The Gallonage Fee paid by the assessee under Rule 15A of the Foreign Liquor Rules with respect to the wholesale trade in foreign liquor for human consumption, cannot be equated or in any way identical to the Gallonage Fee paid by any industrial or research undertaking, in respect of the rectified spirit / industrial spirit dealt with them, which are governed by provisions of the Kerala Rectified Spirit Rules. Both the levies cannot be considered as similar, because the levies are on different trades for different products, charged under separate statutes. Merely because the same nomenclature of Gallonage Fee is used, it cannot be contended that there is no exclusivity with respect to the levy of Gallonage Fee from the assessee, is the argument. Accept the view taken by the Tribunal, which confirmed the view of the authorities below. As supported by the learned Assistant Solicitor General of India, as long as it is not in dispute that the wholesale trade in foreign liquor under FL-9 licence is an exclusive trade in the state permitted to the assessee herein alone, the Gallonage Fee levied under the Foreign Liquor Rules becomes an ‘exclusive levy’ on the assessee. Therefore we are of the considered opinion that the levy of Gallonage Fee with respect to the wholesale trade under the FL-9 licence will squarely fall within the scope of the disallowances provided under Section 40 (a) (iib). Hence the finding of the Tribunal in this regard need to be upheld. Licence Fee and Shop Rental (Kist) - Question is whether the ‘exclusivity’ will be lost if it is levied from more than one State Government undertaking. Sub-clause (iib) of Clause (a) of Section 40 provides that, any amount paid by way of royalty, licence fee, service fee, privilege fee, service charge, or any other fee or charge “which is levied exclusively on” a state government undertaking by the State Government (emphasis supplied) alone will satisfy the ingredients for disallowance. The statute has not used the word; levied exclusively on the state government undertakings by the State Government. Instead, the word used is “exclusively on” “a state government undertaking”. Therefore, inorder to bring the disallowance within the ambit and scope of Section 40 (a) (iib), it should be an exclusive levy on the assessee, which should be a state government undertaking. Since the licence fee and shop rental (kist) are also levied from the Consumer Federation with respect to the FL-1 licence granted, it becomes out of the purview of the term ‘levied exclusively on a state government undertaking, contained in 40 (a) (iib). Disallowance made with respect to the licence fee and shop rental (kist) paid with respect to the FL-1 licences granted to the appellant for retail trade in foreign liquor, cannot be sustained. Surcharge on Sales Tax and Turnover tax - Surcharge on sales tax was introduced only as an increase in the tax payable. Merely because the statute imposed a prohibition with respect to passing on such liability to others, the basic characteristics of the levy is not changed. As settled through various legal precedents, a ‘tax’ cannot by equated with a ‘fee or charge’. When the provisions contained in Section 40 (a) (iib) is clear in its terms that it will take in only ‘fee or charges’ enumerated therein or any ‘fee or charge by whatever name called, it is clear that any levy of ‘tax’ is outside the ambit and scope of the said provision. In order to include surcharge on sales tax or turnover tax within the sweep of Section 40 (a) (iib), it becomes necessary to read something into the provision. Therefore we are inclined to accept the view as contended by the appellant, that the disallowance of surcharge on sales tax and turnover tax cannot be sustained. While summing up the conclusions, we are persuaded to answer the question of law raised, partly in favour of the revenue and partly in favour of the assessee.
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