TMI Blog2017 (8) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, 122/14-15, 145/15-16, 233/15-16 dated 06.09.2016 for the AYs 2010-11, 2011-12, 2012-13, 2012-13 ITA No.233/Mds/2017 is an appeal filed by the assessee against the Order of Commissioner of Income Tax (Appeals)-11, Chennai, in ITA No.115/16- 17/CIT(A)-11 dated 23.12.2016 for the AY 2013-14. 2. Mrs.Ruby George, CIT represented on behalf of the Revenue and Mr.R.Vijayaraghavan, Adv. represented on behalf of the assessee. 3. As the issues in all these cases are inter-connected, common and relates to the same assessee, all these issues are disposed of by this common order. 4. The assessee has filed concise grounds of appeals for all the three assessment years as follows: 1. The order of The Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case. 2. The CIT(A) erred in confirming the disallowance of entirety of special privilege fee/annual privilege fee (License Renewal fee)/vend fee/special fees paid during the relevant previous year in accordance with and in compliance with the Tami Nadu Prohibition Act 1937 read with the Tamil Nadu liquor (Supply by Whole sale) Rules, 1983. 2.1 The CIT(A) ought to have appreciated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciated that the decision of Hon ble Karnataka? High Court in the case of M/s.Karnataka Beverages Corporation v CIT reported in 238 Taxman 0299 following the case of Apex Court in the case of Har Shankar V DTC - AIR - 1975 SC 1121 has held that fees levied by the State in respect of grant of license or privilege fee cannot be disallowed on the ground that it is not reasonable its power to levy fee and not mode of computation or Levy of fee is essence of the power of the State to levy said fee. 5.3 The CIT (A) ought to have appreciated that the G.Os have been validly legislated by placing before the Legislative Assembly and duly notified in the Official Gazette. 6. The CIT (A) erred in relying on the decision of the Hyderabad Tribunal in the case of Andhra Pradesh Beverages Corporation Limited ignoring the decision of the Co-ordinate Bench in assessee s own case. 6.1 The CIT(A) ought to have appreciated that the decision of the Hyderabad Tribunal was based on the Prohibition Act applicable to the State of Andhra Pradesh and the privilege fee etc., paid by Andhra Pradesh Beverages Corporation Ltd., and the Tribunal held that there was no specific provision char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IMFS (Supply by wholesale) Rules, 1983. These substitutions were basically in respect of 3 categories: i. The vend fee which is a fee collected from the assessee on the purchase of liquor. ii. Special privilege fee collected in respect of the sale of liquor under Sec.17C and iii. The annual license fee being the license fee in respect of the various shops nearly 6200 running by the assessee under Sec.15D. 6. It was a submission that for the AYs 1983-84 to 1986-87, the various fees paid by the assessee to the government of the state of Tamil Nadu had been disallowed by the AO by holding that the provisions of Sec.43B applied. It was a submission that this issue of vend fee had come in appeal before the Hon ble Supreme Court in the case of Travancore Sugars Chemicals Ltd., reported in Civil Appeal No.2558/2005, wherein the Hon ble Supreme Court by an order dated 07.05.2015 had held that the 43B did apply and if the vend fee was paid by the assessee to the state before the due date for filing return then it is allowable as it would fall under fee by whatever name called , even if the vend fee is called privilege . The Hon ble Supreme Court had held that if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of business of the assessee and was clearly a statutory levy in so far as the levy is as per the provisions of Sec.17D of the Tamil Nadu Prohibition Act, 1937 r/w Rule 15 of the Tamil Nadu IMFS (Supply by wholesale) Rules, 1983 and the said GOs were issued under the name of the Governor of Tamil Nadu after having been put through assembly. It was a further submission that the issue was fully covered by the decision of the Hon ble Karnataka High Court in the case of Karnataka State Beverages Corporation Ltd., reported in [2017] 391 ITR 185 (Karn). It was a submission that the additions made by the AO and as confirmed by the Ld.CIT(A) in respect of the various fees paid by the assessee to the State Government was liable to be allowed. 8. In reply, the Ld.DR submitted that the levy of the fee has put the assessee into a loss and loss is an artificial loss and is basically a bogus loss on account of the unreasonable fees levied by the State Government on the assessee s company for the purpose of stripping the assessee company of all its profits. It was a further submission that the Managing Director of the assessee s company, though a government servant had written to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the special privilege fee, the allegation of the Revenue seems to be that the Managing Director of the assessee s company who is also a government servant has intimated the government regarding the profitability of the assessee s company and the possible rates that could be fixed and the State Government after considering the same had increased the levy accordingly. In respect of the vend fee also, the Revenue argued that its application in so far as the same was not considered while computing the cost in respect of the liquor sold by the assessee. The fact being missed is that the assessee is a company owned and controlled by the State Government. The Directors of the assessee s company are also appointees by the State Government. Admittedly, the assessee is also the monopoly dealer of liquor in the state of Tamil Nadu on account of the Tamil Nadu Prohibition Act, 1937. The levy on the assessee company is not by way of any demand but by way of a statutory compulsion in so far as the GOs are modifying the Rule 15 of the Tamil Nadu IMFS (Supply by wholesale) Rules, 1983. This being so, it cannot be said that there is a colourable device or that any attempt is being made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of these cases in so far as the Assessing Officer having expressed an opinion of the State Government having exercised its power unscientifically, illegally and irrationally . (sic) 10. A perusal of the decision of the ITAT Hyderabad Bench in the case of AP Beverages Corporation Ltd., showed that Co-ordinate Bench had clearly and categorically specified that the facts in the case of AP Beverages Corporation Ltd., were distinguishable from the facts of the assessee s case, therefore, admittedly the said decision cannot be held to have any persuasive value. In these circumstances, as the issue of fees levied by the government has already been held to be an allowable expenditure, respectfully following the principles laid down in the decision of the Hon ble Karnataka High Court in the case of Karnataka Beverages Corporation Ltd., the additions made by the AO and as confirmed by the Ld.CIT(A) in respect of the vend fee, special privilege fee and the annual license fee stands deleted. 11. In the result, the appeals filed by the assessee are allowed. Order pronounced in the Open Court on August 21, 2017, at Chennai. - - TaxTMI - TMITax - Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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