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TMI Blog2022 (12) TMI 1498X X X X Extracts X X X X X X X X Extracts X X X X ..... /RPR/2021 for the assessment year 2015-16 as the lead matter, and, the order therein passed qua the common issue(s) therein involved shall apply mutatis-mutandis to the remaining cases. The assessee has assailed the impugned order passed by the Pr. CIT u/s.263 of the Act, dated 28.03.2021 on the following grounds of appeal before us : "1. Ground 1: That on the facts and on the circumstances of the case and in law, Ld. PCIT has erred in initiating Revision Proceedings u/s. 263, since there were no materials before him to justify his finding that Assessment Order passed by the AO is erroneous insofar as it was prejudicial to the interests of the Revenue. Since the twin condition is not satisfied, entire Revision proceedings are void-ab-initio and may kindly be quashed/annulled. 2. Ground 2: That on the facts and on the circumstances of the case and in law, since there was no error in the assessment order passed u/s.143(3), the revision proceedings-initiated u/s 263 is void ab initio and against law of natural justice. Revision proceedings may kindly be quashed/ annulled. 3. Ground 3: That on the facts and on the circumstances of the case and in law, Ld. Pr. CIT has erred in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Order may kindly be quashed/annulled." 3. Succinctly stated, the assessee company which is wholly owned by the State Government of Chhattisgarh had e-filed its return of income for A.Y.2015-16 on 30.09.2015, declaring an income of Rs. 22,88,04,100/-. Subsequently, the assessee had revised its return of income on 30.03.2016 at the originally declared income of Rs. 22,88,04,100/-. Case of the assessee was thereafter selected for "limited scrutiny" under CASS for the following reasons: (i). Large deduction claimed under chapter VI-A. (ii). Lage other expenses claimed in the Profit & Loss a/c. (iii). Mismatch in sales turnover reported in Audit report and ITR Original assessment was, thereafter, framed by the A.O vide his order passed u/s.143(3), dated 30.10.2017 determining income of the assessee at Rs.25,43,28,545/-. 4. The Pr. CIT after culmination of the assessment proceedings called for the assessment records of the assessee company. On a perusal of the records, it was observed by the Pr. CIT that the assessee company under the heading "Administrative Selling & Other Expenses" had debited an amount of Rs.53,65,46,087/- under the sub-head "VAT". It was observed by the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.53.65 crore (approx.) was appropriated by the State Government from the assessee company, which was admittedly a State Government undertaking. On the basis of his aforesaid deliberation, the Pr. CIT was of the view that the appropriation of the aforesaid amount of Rs.53.65 crore (supra) clearly fell within the realm of disallowance contemplated in sub-clause (B) of clause (iib) of Section 40(a) of the Act, as per which any amount appropriated directly or indirectly under any head by whatever name called, from a State Government undertaking by the State Government is not to be allowed as a deduction in computing the income chargeable under the head "profits and gains from business or profession". 5. Also, it was observed by the Pr. CIT that as the gross profit of the assessee company for the year under consideration had not perceptibly increased in comparison to that of the preceding year, therefore, it could safely be concluded that the VAT charges on the assessee company was not incorporated in its selling rate. Considering the fact that the A.O had not conducted any enquiry in respect of the assessee's entitlement for claim of deduction of VAT which was debited in its profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court of Kerala, wherein it was held that as surcharge on sales tax is a tax and Section 40(a)(iib) does not contemplate 'tax', and surcharge on sales tax is not a 'fee' or a 'charge', therefore, no disallowance under the said section was called for in the hands of the assessee. It was averred by the Ld. AR that though the Hon'ble Apex Court had upheld the view taken by the Hon'ble High Court to the extent triggering of disallowance u/s.40(a)(iib) of the Act qua the 'gallonage fee', 'license fee' etc. was concerned, but had categorically observed that as surcharge on sales tax and turnover tax was not a fee or charge coming within the scope of Section 40(a)(iib)(A) or 40(a)(iib)(B), therefore, the same as held by the Hon'ble High Court could not be disallowed under the said statutory provision. 8.1 It was submitted by the Ld. AR that now when the Hon'ble Apex Court had distinguished "gallonage fee" as against "tax", therefore, the reliance placed by the Pr. CIT on the judgment of the Hon'ble High Court of Kerala in the case of Kerala State Beverages (Manufacturing and Marketing) Corporation Limited Vs. ACIT, Circle-1(i) (supra) in so far the same pertained to dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's claim for deduction of the aforesaid amount. 8.3 It was further submitted by the Ld. AR that it was not a case where the A.O had in the course of the scrutiny assessment got the "limited scrutiny" assessment proceedings converted into "full scrutiny" by obtaining the approval of the Pr. CIT. On the basis of his aforesaid contentions, it was submitted by the Ld. AR that now when the A.O in the course of the "limited scrutiny" assessment could not have drawn any inferences as regards the maintainability of the assessee's claim for deduction of VAT of Rs.53.65 crore (supra), therefore, the Pr. CIT could not have held the order passed by the A.O as erroneous, for the reason that he had failed to disallow the said claim of deduction of the assessee. It was, thus, the claim of the Ld. AR that what under law could not have been directly done by the A.O, could not have been indirectly done by the Pr. CIT in the garb of the jurisdiction vested with him u/s.263 of the Act. In support of his aforesaid contentions the Ld. AR had relied on the order of the ITAT, Mumbai in the case of M/s Su-Raj Diamond Dealers Pvt. Ltd Vs. Pr. CIT, ITA No.3098/Mum/2019 dated 27.11.2019. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Chhattisgarh, as in the past, was nothing but license fee, privilege fee etc., therefore, the same clearly fell within the realm of the disallowance contemplated u/s 40(a)(iib) of the Act. 10. Rebutting the aforesaid contention of the Ld. DR, it was submitted by the Mr. Praveen Jain, the Ld. Counsel for the assessee, that the aforesaid claim of the department was absolutely misconceived and in fact, misplaced. Elaborating on his aforesaid contention, it was submitted by Mr. Jain, the ld. A.R that the "VAT" paid by the assessee was clearly a "tax" and not in the nature of "fee" or "charge". It was submitted by the Ld. AR that the amount of "license fee" of Rs.4 crore that was paid by the assessee company during the year was suo-moto offered for disallowance u/s. 40(a)(iib) of the Act. In order to fortify his aforesaid contention, the Ld. AR had taken us through the "Sr. No.8, Part A (i) of the return of income", which duly supported his aforesaid claim. 11. Controversy involved in the present appeal lies in a narrow compass ,i.e., sustainability of the disallowance of the assessee's claim for deduction of "VAT" on sale of liquor. As observed by us hereinabove, the Pr. CIT h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R that the term "VAT" is a misnomer, as the same in substance is not a "tax" but "license fee", "privilege fee" etc. which in the preceding years was collected by the State Government from the assessee company, and that the change in the nomenclature to such collection was prompted with an ulterior motive to evade the rigors of disallowance contemplated under sub-clause (iib) of Section 40(A) of the Act that was made available on the statute vide the Finance Act, 2013 w.e.f. 01.04.2014, we are unable to persuade ourselves to subscribe to the same. We, say so, for the reason that the term 'Value Added Sales Tax" (VAT) as defined under Section 2(z) of the Chhattisgarh Value Added Sales Tax Act, 2003 clearly provides that the same would mean tax on sale or purchase of goods payable under the Act. As "VAT" levied by the State Government of Chhattisgarh on the assessee company is admittedly a "tax", therefore, we are of the considered view that the same pursuant to the judgment of the Hon'ble Supreme Court in the case of Kerala State Beverages Manufacturing & Marketing Corporation Ltd. Vs. ACIT, Circle-1(1), Civil Appeal No.11 of 2022 (SC) dated 03.01.2022 could not have been brought wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2015-16 is allowed in terms our aforesaid observations. ITA Nos. 39 & 40/RPR/2021 A.Ys. 2016-17 & 2017-18 16. As the facts and the issues involved in the captioned appeals qua the merits leading to the disallowances of assessee's claim for deduction of 'VAT' u/s. 40(a)(iib) of the Act remains the same, as were there before us in ITA No.38/RPR/2021 for the assessment year 2015-16, therefore, the order therein passed, to the said extent, shall mutatis-mutandis apply for the purpose of disposal of the captioned appeals. 17. At this stage, we may herein observe that the assessee had also assailed the validity of jurisdiction assumed by the Pr. CIT u/s.263 of the Act, wherein he had directed the A.O to disallow the assessee's claim for deduction of "VAT" u/s.40(a)(iib) of the Act, for the reason, that now when no such disallowance could have been made vide an intimation issued by the A.O u/s.143(1) of the Act, therefore, the Pr. CIT could not have been expanded the scope of jurisdiction vested with the A.O pursuant to his aforesaid direction issued in the garb of his jurisdiction u/s 263 of the Act. In sum and substance, it was the claim of the Ld. AR that what could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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