Assessing officer being a statutory authority under the Act is bound to respect all the laws may be made by the Parliament or may be made by the State Legislature. He has no jurisdiction to examine the constitutional validity of any Act or the statute or a subordinate legislation which creates statutory liability upon the assessee to make the payment by way of an expenditure incurred.
Assessing officer has no authority or competence to hold that the privilege fee is not having the character of statutory fee or that the State Legislature or the State Government in exercise of its power by way of a delegated legislation, cannot decide the quantum of fee or the percentage of the revenue on the income earned from the business. Be it recorded that the assessing officer was not exercising the power as that of a constitutional Court nor at any point of time the constitutional validity of the Karnataka Excise Act read with the Rules which include the grant of licence and payment of the privilege fees were under the challenge. It is not the case of the appellant that the assessing officer had any authority, competence or jurisdiction to examine the constitutional validity of the State Legislature or subordinate legislation in exercise of the delegated power.
Under the circumstances, the observations made by the assessing officer in the impugned order so far as privilege fee is concerned can be said to be ultravires to his power under the Act.
In view of the above, if an action of disallowance of the deduction of privilege fee, the expenditure of privilege fee is wholly without jurisdiction and ultravires to his power, it would be the case falling under exceptional category for entertainment of writ power under Article 226 of the Constitution of India.
In view of the above, the disallowance of the deduction of privilege fees as expenditure is wholly without jurisdiction and the observations made by the assessing Officer so far as constitutional validity of the relevant Act and the Rules and the power exercised by the State for delegated legislation for fixation of the quantum of fees can also be said as ultravires to his power because he has no power or authority to test the validity of any statutory provision, may be made by the State Legislature or the Parliament.
Under the circumstances, we find that the case would fall in the exceptional category to make a departure from the normal principle of relegating the party to the statutory remedy by way of appeal in exercise of power under Article 226 of the Constitution.
The exercise of the power by the learned Single Judge for remanding the matter to the Assessing Officer for consideration other than of privilege fees also cannot be said as erroneous because the assessment order is a composite order on account of the finding recorded that the action of disallowance of the expenditure for payment of privilege fees is without jurisdiction and ultravires to the power. Consequently change/modification will have to be made in the order including the clause with all the interest etc..
Relevant Extract of the Judgment
3. The short facts of the case appears to be that, the respondent-original petitioner is a Company being an undertaking of the Government of Karnataka engaged in the business of canalization of liquor, beer and rectified spirit. In respect of the assessment year of 2009-10, 2010-11, 2011-12 and 2012-13, the assessing officer under Section 143(3) of the Income Tax Act (hereinafter referred to as `the Act’) after making assessment, has passed the order disallowing of privilege fee of the respective amount paid by the respondent-Company to the Government of Karnataka. The other disallowance was also made in the assessment year in respect of certain other expenses.
4. We may, for ready reference, reproduce the details of the original writ petitions, writ appeals, assessment year and the privilege fees which are disallowed by the impugned assessment orders in the respective original writ petitions as under:
