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ITO, Ward-2 (2) , Durgapur Versus Pravat Kumar Gupta

2018 (2) TMI 271 - ITAT KOLKATA

Disallowance made u/s 40A(3) - Held that:- Assessee’s case falls under the exceptions provided in Rule 6DD(b) and (k) of the Rules and accordingly, no disallowance u/s 40A(3) of the Act could be made and accordingly we direct the ld AO to delete the same. Accordingly the grounds raised by the revenue are dismissed. See Ramnagar Pachai & C.S. Shop vs ITO [2017 (2) TMI 400 - ITAT KOLKATA] - Decided in favour of assessee - I.T.A No. 1015/Kol/2016 - Dated:- 2-2-2018 - Shri M. Balaganesh, AM And Shri .....

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Assessment Year 2011-12. 2. The only issue to be decided in the appeal of the revenue is as to whether the ld CITA was justified in deleting the disallowance made u/s 40A(3) of the Act in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is an individual engaged in the business of retail vending of country spirit, beer and rum, which are excisable commodities. Its purchase and sale are strictly controlled by the State Government. Previously, the retai .....

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duty and bottling charges etc only to the wholesale licensee appointed by the State Government. Following the revised procedure, the assessee made payments to M/s IFB Agro Industries Ltd towards purchases of country liquor. Against the aforesaid purchases, the assessee made payments in cash by depositing money directly to the bank account of the aforesaid company. The ld AO observed that the payment for purchase was exceeding ₹ 20,000/- resulting in violation of provisions of section 40A(3 .....

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sidering the fact that cash payment made by assessee to M/s IFB Agro Industries Ltd, Panagarh in any way cannot be treated as payment made to the Government. 2. That on the facts and circumstances of the case Ld. Commissioner of Income Tax(Appeals)-Durgapur erred to recognize that there was any binding/obligation on the assessee to make cash purchase only. 3. That the appellant craves leave to add, alter, amend, modify, substitute, delete and/or rescind all or any grounds of appeal on or before .....

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erused the materials available on record. We have also gone through the provisions of The West Bengal Excise Rules 2005 and The Bengal Excise Act, 1909. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. At the outset, we deem it necessary to incorporate the following clauses from the Notification issued by the Excise Department, Government of West Bengal, dated 29.8.2005 for the sake of better understanding of the facts :- In exercise o .....

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dors of the same for the purpose of selling country spirit by wholesale:- Rules 1. Short Title and commencement.-(1) These rules may be called the West Bengal Excise (Supply of Country Spirit on Payment of Duty) Rules, 2005. (2) These rules shall come into force from 19th October, 2005. 2. Definitions.-(1) In these rules, unless there is anything repugnant in the subject or context- (i) Commissioner means the Excise Commissioner; (ii) requisition means the requisition submitted by the authorized .....

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supply of country spirit to retail vendors, established at convenient places by the Commissioner at the expense of the State Government, or at the expense of a person to whom the exclusive privilege of supplying or selling country spirit by wholesale has been granted under section 22 of the Act, or of a licensed wholesale vendor of country spirit; (viii) wholesale licensee means the wholesale vendor of country spirit to whom license has been granted in West Bengal Excise Form No. 26. 2. Words an .....

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ll maintain a Personal Ledger Account in accordance with the direction issued by the Commissioner from time to time for the purpose of maintaining an account-current of the duties payable by the wholesale licensee for the issues of country spirit to the retail vendors or transport on payment of duty from the concerned country spirit bottling plant or warehouse. 6. Procedure of issue of country spirit.-(1) The retail vendor or his authorized representative shall submit to the representative of th .....

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tative shall submit to the representative of the wholesale licensee, through Excise Officer-in-Charge of the warehouse, a demand for issue of country spirit in Form I appended to these rules in duplicate. The duplicate copy shall be kept in the custody of the Excise Officer-in-Charge for his official record. (2) No retail vendor of country spirit shall deposit duty direct into the local treasury for issue of country spirit to be taken by him from the warehouse concerned. Duty, cost price, bottli .....

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warehouse. The authorized representative as above shall then submit requisition in duplicate in Form II appended to these rules to the Excise Officer-in-Charge of the warehouse separately for each of the retail vendors to whom country spirit is to be issued on the day. (4) On receipt of the requisition in Form II, the Excise Officer-in-Charge of the warehouse shall allow issue of country spirit from the warehouse. Duplicate copy of the requisition shall be returned to the authorized representat .....

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spirit licensees whose licensed premises are located at a distance of 50 kilometres or more by the shortest route from the issuing warehouse on the basis of a certificate to be issued by the Collector in respect of distance. At the end of the month, the wholesaler shall submit a bill in duplicate to the Officer-in-Charge of the warehouse claiming refund of the amount granted as rebate. The Officer-in-Charge shall, on receipt of the bill, refund the amount claimed after verifying his records thr .....

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nate Bench of Bangalore Tribunal in the case of Sri Renukeswara Rice Mills vs ITO reported in 93 ITD 263 (Bang Trib.) is well founded, wherein, it was held that the cash payment in the bank account of the payee is sufficient to get exemption in terms of Rule 6DD in as much it is ensured that the payee and payee alone receives the payment and the origin and conclusion of the transaction is traceable thereby fulfilling the criterion for ensuring the object of introduction of section 40A(3) of the .....

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case relied upon by the ld AR supra had elaborately dealt with the impugned issue with specific reference to the West Bengal Excise Rules and Bengal Excise Act, case laws on the impugned issue and ultimately held as below:- 21. We find that M/s Asansol Bottling & Packaging Co. Pvt Ltd is a bottling plant cum warehouse under Rule 2(vii) of The West Bengal Excise Rules 2005 with privilege granted u/s 22 of The Bengal Excise Act, 1909. At this juncture, it would be relevant to go into the defin .....

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y spirit. The above definition makes it clear that the warehouse referred to under the State Excise Rules is under the direct control and authority of the Commissioner of State Excise because it is established by the Commissioner of State Excise and as such is a State Government establishment. It is also pertinent to note that the expenditure in relation to such warehouse is borne by the State Government or by the licensee to whom the exclusive privilege is granted u/s 22 of the Bengal Excise Ac .....

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ensee as per Rule 2(viii) of the Excise Rules 2005 as below:- Rule 2(viii) - Wholesale licensee means the wholesale vendor of country spirit to whom licence has been granted in West Bengal Excise Form No. 26. It would be pertinent to look into Section 22 of The Bengal Excise Act, 1909 at this juncture as below:- Section 22 - Grant of exclusive privilege of manufacture and sale of country liquor or intoxicating drugs (1) The State Government may grant to any person, on such conditions and for suc .....

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ve privilege, and that any objections made by any person residing within the area affected shall be considered before an exclusive privilege is granted. (2) No grantee of any privilege under sub-section (1) shall exercise the same unless or until he has received a license in that behalf from the Collector or the Excise Commissioner. Hence it could be safely concluded that M/s Asansol Bottling & Packaging Co. Pvt Ltd (Bottling Plant) is a warehouse within the meaning of Rule 2(vii) of the Exc .....

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f M/s ABPL as per Rule 6(2) of the Excise Rules 2005, it has to be construed as payment made to the State Government authority and accordingly falls under the exception provided in Rule 6DD(b) of the IT Rules. 22. It is not in dispute that M/s Asansol Bottling & Packaging Co. Pvt Ltd have been granted licence to act as a wholesaler for supply of country liquor to the retail vendor as per the regulations of the Excise Department, Government of West Bengal. At the cost of repetition, we would .....

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onstrued as an agent of the State Government. For the sake of convenience, the relevant rule is reproduced hereunder:- Rule 6DD(k) - where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person. The payment made by the assessee retail vendor to the Principal, Government of West Bengal through its wholesale agent. The relationship between the assessee (authorized retailer) and Government of West Bengal (the supplier) a .....

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