KERALA STATE BEVEARAGES, (MANUFACTURING & MARKETING)CORPORATION LTD Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The issue raised in the appeal for the assessment year 2015-16, is the enhanced demand made on the appellant, far in excess of what is returned, by reason of the introduction of a new provision at Section 40(a)(iib) of the Income Tax Act, 1961 (for short 'the Act'). The assessee filed return showing a total income of Rs.2, 34, 39, 61, 420/-. A disallowance was made to deductions claimed as gallonage fee, licence fee, shop rental (kist) and surcharge on sales tax. This was a deduction allowed over the years, which stood disallowed in the present year for reason of the introduction of the aforesaid provision. The disallowance came to Rs.8, 11, 90, 88, 115/-.

(2.) We see from the assessment order as also the order impugned in the Writ Petition that the disallowance was made based on the provision as introduced in clause (iib) in Section 40(a), which is extracted hereunder:

(3.) Definitely, the appellant is a State Government Undertaking. But, however, the dispute is on whether the levy is exclusively on the appellant and whether there is any appropriation directly or indirectly, in so far as the various levies imposed on the appellant. The learned Counsel for the appellant submits that the levy imposed, cannot be said to be exclusive, since it is imposed on any vendor of liquor within the State. The fact remains that the privilege, as available with the State for vending liquor, has been conceded to the Corporation, which carries out the same under licenses issued under the Abkari Act. The retail sales are only through outlets of itself and a Consumer Co-operative Society. There is also sales effected to bars and clubs existing inside the State, who are also licensed under the Abkari Act. The levy of license fee at Rs.5, 75, 00, 000/- is with respect to the licenses obtained by individuals or institutions for a single day and the shop rental is applicable to all the retail shops within the Kerala, which are run either by the appellant-Corporation or by the Consumer Co-operative Society. The surcharge on sales tax is applicable to all who sell Indian made foreign liquor inside the State. The gallonage fee is an exclusive levy on the Corporation only by reason of the monopoly and in any event such fee is also levied on distilleries, who supplies spirit to the hospitals within the State. In such circumstances, there cannot be said to be an exclusive levy nor an appropriation directly or indirectly by the State Government.