Case Law Details
Kerala State Beverages (Manufactoring And Marketing) Corporation Limited Vs ACIT (Kerala High Court)
Conclusion: Surcharge on sales tax and turnover tax was not a ‘fee or charge’ coming within the scope of Section 40 (a) (iib) and was not an amount which could be disallowed under the said provision. Therefore the disallowance made in this regard was liable to be set aside.
Held: DCIT finalized the assessment of income tax against assessee under Section 143 (3). But, Pr. CIT initiated proceedings under Section 263 on the ground that the same was erroneous and was prejudicial to the interest of the revenue, to the extent it failed to disallow the debits made in the Profit and Loss Account of the assessee with respect to the amount of surcharge on sales tax and turn over tax paid to the State Government, which ought to have been disallowed under Section 40 (a) (iib). Against the same order, appellant approached the Tribunal, which dismissed the petition. On appeal to High Court. It was held that surcharge on sales tax was introduced only as an increase in the tax payable. Merely because the statute imposed a prohibition with respect to passing on such liability to others, the basic characteristics of the levy was not changed. As settled through various legal precedents, a ‘tax’ cannot by equated with a ‘fee or charge’. When the provisions contained in Section 40 (a) (iib) is clear in its terms that it will take in only ‘fee or charges’ enumerated therein or any ‘fee or charge by whatever name called, it is clear that any levy of ‘tax’ is outside the ambit and scope of the said provision. Inorder to include surcharge on sales tax or turnover tax within the sweep of Section 40 (a) (iib), it became necessary to read something into the provision. Therefore, the disallowance of surcharge on sales tax and turnover tax could not be sustained.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Income Tax Appeal Nos. 135/2019 & 146/2019 are filed challenging a common order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA Nos.536/Coch/2018 and 537/Coch/2018, dated 12-03-2019. Income Tax Appeal No.313/2019 is filed against the revised order passed by the same Tribunal ITA No.537/Coch/2018, dated 11-10-2019. The assessee was the appellant before the Tribunal, who is the appellant herein. The revenue is the respondent.
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