KERALA STATE BEVERAGES MANUFACTURING & MARKETING CORPORATION LTD. versus THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1)

KERALA STATE BEVERAGES MANUFACTURING & MARKETING CORPORATION LTD. versus THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1)

The Court held that s.40(a)(iib) disallows deduction of amounts (royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge) levied exclusively on, or appropriated from, a State Government undertaking; gallonage fee, licence fee and shop rental (kist) payable under the Abkari Act for FL-9 and FL-1 licences granted to KSBC fall within s.40(a)(iib) and are not deductible, whereas surcharge on sales tax and turnover tax are taxes (enhancements of basic sales tax) and not 'fee or charge' within s.40(a)(iib)(A)/(B) and therefore do not fall to be disallowed under that provision.

Parties
Appellant / Assessee: Kerala State Beverages Manufacturing & Marketing Corporation Ltd.; Respondent / Revenue: The Assistant Commissioner of Income Tax Circle 1(1)
Jurisdiction
India
Judgment Date
03 January 2022
Procedural Posture
Civil Appeal / Supreme Court Judgment on Appeals From High Court Order Dated 30.04.2020
Outcome
Appeal of the assessee dismissed; appeals filed by the revenue partly allowed as indicated; High Court order partly upheld and partly set aside.
Legal Topics
Section 40(a)(iib) of Income Tax Act, Deductibility of Fees/charges, Exclusive Levy on State Government Undertakings, Surcharge on Sales Tax, Turnover Tax, Interpretation and Legislative Intent
Income Tax Constitutional Law Excise Law Administrative Law Section 40(a)(iib) of Income Tax Act Deductibility of Fees/charges Exclusive Levy on State Government Undertakings Surcharge on Sales Tax +2 more

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Parties

Kerala State Beverages Manufacturing & Marketing Corporation Ltd.

Appellant / Assessee

The Assistant Commissioner of Income Tax Circle 1(1)

Respondent / Revenue

Procedural Posture

Civil Appeal / Supreme Court Judgment on Appeals From High Court Order Dated 30.04.2020

Legal Issues

  1. 1 Whether gallonage fee, licence fee and shop rental (kist) payable under Abkari Act for FL-9 and FL-1 licences fall within s.40(a)(iib) of the Income-tax Act, 1961
  2. 2 Whether surcharge on sales tax and turnover tax fall within the scope of s.40(a)(iib) as a fee or charge or as an appropriation under s.40(a)(iib)(B)
  3. 3 Proper meaning of 'levied exclusively on' and 'any other fee or charge' in s.40(a)(iib) in context of State Government undertakings and legislative intent under Finance Act 2013

Ratio Decidendi

The Court held that s.40(a)(iib) disallows deduction of amounts (royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge) levied exclusively on, or appropriated from, a State Government undertaking; gallonage fee, licence fee and shop rental (kist) payable under the Abkari Act for FL-9 and FL-1 licences granted to KSBC fall within s.40(a)(iib) and are not deductible, whereas surcharge on sales tax and turnover tax are taxes (enhancements of basic sales tax) and not 'fee or charge' within s.40(a)(iib)(A)/(B) and therefore do not fall to be disallowed under that provision.

Court Disposition

Appeal of the assessee dismissed; appeals filed by the revenue partly allowed as indicated; High Court order partly upheld and partly set aside.

Orders

  • Assessments for assessment years 2014-2015 and 2015-2016 set aside.
  • Matter remitted to the Assessing Officer to pass revised orders computing tax liability in accordance with the Supreme Court directions (gallonage fee, licence fee and shop rental disallowable under s.40(a)(iib); surcharge on sales tax and turnover tax not disallowable under s.40(a)(iib)).