Sri Prabir Kumar Mallick, Burdwan V. ITO, WD-3(1), ASANSOL, Asansol

ITA 1005/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1662 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: K K KHEMKA
• Section: 40A(3)

Judgement Text

ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM ] ITA NO.1005/KOL/2016 ASSESSMENT YEAR : 2010-11 SRI PRABIR KUMAR MALLICK -VERSUS- I.T.O., WA RD-3(1) BURDWAN ASANSOL (PAN: AJEPM 7142 G) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI K.K.KHEMKA, ADVOCATE FOR THE RESPONDENT: SHRI KALYAN NATH, ADDL. CIT(DR) DATE OF HEARING : 22.08.2017. DATE OF PRONOUNCEMENT : 25.08.2017. ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 30.03.2016 OF CIT(A)-ASANSOL RELATING TO AY 2010-11. 2. GROUND NO.2 WAS NOT PRESSED BY THE ASSESSEE AND HENCE DISMISSED AS NOT PRESSED. 3. GROUND NO.1 RAISED BY THE ASSESSEE ALONE SURVIVE S FOR CONSIDERATION AND THE SAID GROUND READS AS FOLLOWS :- 1. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN LAW & ON FACTS IN CONFIRMING DISALLOWANCE U/S 40A(3) RS.2, 48,09,463/- MADE BY THE AO. 4. THE ASSESSEE IS AN INDIVIDUAL. HE CARRIES ON T HE BUSINESS OF SELLING COUNTRY LIQUOR, BEER, RUM AND WHISKEY. IN THE BUSINESS OF SELLING C OUNTRY LIQUOR, THE ASSESSEE HAS TO PURCHASE COUNTRY LIQUOR FROM ASANSOL BOTTLING AND PACKAGING PVT. LTD WHO ARE THE AUTHORISED BOTTLER, PERMITTED TO DO THE WORK OF BOT TLING OF COUNTRY LIQUOR BY THE EXCISE DEPARTMENT IN ASANSOL. THE BOTTLING PLANTS WILL SU PPLY COUNTRY LIQUOR ONLY AFTER PAYMENT OF THE TOTAL PRICE OF THE REQUIRED BOTTLES OF COUNTRY LIQUOR INCLUDING (TAX COLLECTION AT SOURCE (TCS) IN THEIR BANK ACCOUNT. T HE ASSESSEE HAS TO FURNISH THE ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 2 DEPOSIT SLIP TO THE BOTTLERS AND ONLY THEN THEY WIL L BE PERMITTED TO LIFT THE COUNTRY LIQUOR FROM THE BOTTLING PLANT. THE ASSESSEE DEPOSI TED THE AMOUNT FOR LIFTING BOTTLES OF COUNTRY LIQUOR FROM THE AUTHORIZED BOTTLER M/S.ASAN SOL BOTTLING AND PACKING PVT.LTD., ASANSOL, BY DEPOSITING CASH IN THE STATE BANK OF I NDIA, ASANSOL IN THE ACCOUNT OF ASANSOL BOTTLING AND PACKING CO.PVT. LTD. THE AO WA S OF THE VIEW THAT AS REQUIRED BY THE PROVISION OF SECTION 40A(3) OF THE ACT ANY P AYMENT OVER AND ABOVE A SUM OF RS.20,000/- HAS TO BE MADE ONLY BY WAY OF ACCOUNT P AYEE CHEQUE OR ACCOUNT PAYEE DRAFT. ANY PAYMENTS MADE IN VIOLATION OF THE AFORES AID PROVISION AND WHICH ARE CLAIMED AS EXPENSES DEDUCTIBLE WHILE COMPUTING INCO ME FROM BUSINESS ARE LIABLE TO BE DISALLOWED AS EXPENSES WHILE COMPUTING INCOME FROM BUSINESS OF AN ASSESSEE. THE PURCHASE PRICE OF COUNTRY LIQUOR WAS CLAIMED AS AN EXPENSE BY THE ASSESSEE IN ARRIVING ITS INCOME FROM BUSINESS. THE AO WAS OF T HE VIEW THAT THE EXPENDITURE CANNOT BE ALLOWED AS THERE WAS A VIOLATION OF THE P ROVISIONS OF SEC.40A(3) OF THE ACT. THERE ARE EXCEPTIONS IN THE PROVISION OF SECTION 40 A(3) OF THE ACT WHICH ARE LAID DOWN IN RULE 6DD OF IT RULES, 1962 (RULES). THE AO HELD THAT NONE OF THE EXCEPTIONS AS MENTIONED IN RULE 6DD EXISTED IN THE CASE OF THE ASSESSEE WHICH WOULD JUSTIFY PAYMENT OF PURCHASE PRICE OF BOTTLERS OF LI QUOR IN CASH AND ACCORDINGLY THE AO DISALLOWED A SUM OF RS.2,48,09,463/- WHICH WAS THE PAYMENTS MADE IN CASH IN VIOLATION OF THE PROVISION OF SECTION 40A(3) OF THE ACT. ON APPEAL BY THE ASSESSEE CIT(A) CONFIRMED THE ORDER OF THE AO. HENCE THIS AP PEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING OF THIS APPEAL IT WAS BROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE THAT AN IDENTICAL ISSUE WA S CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2008-09 IN ITA NO.1603/KOL/2011 BY ITS ORDER DATED 01.06.2016. IN THE AFORESAID ORDER THIS TRIBUNAL ON IDENTICAL FACTS HELD THAT THE DISALLOWANCE U/S 40A(3) OF THE ACT CANNOT BE SU STAINED. THE LD. DR HOWEVER SUBMITTED THAT THE ITAT KOLKATA BENCH IN THE CASE O F MOHAN LAL CHOWDHURY IN ITA NO.1964/KOL/2009 ORDER DATED 30.04.2010 HAS TAKEN A VIEW THAT ONCE THE PROVISION OF SECTION 40A(3) OF THE ACT ARE ATTRACTED THE ASSESSE E CAN ESCAPE DISALLOWANCE ONLY IF ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 3 HIS CASE FALLS WITHIN THE AMBIT OF RULE 6DD. IT WAS POINTED OUT THAT IN THE DECISION RENDERED IN ASSESSEES OWN CASE NO SUCH APPLICABILI TY OF EXCEPTIONS PRESCRIBED UNDER RULE 6DD HAS BEEN SPELT OUT. THE LD. DR ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS PANDURANGA ENTERPRISES IN ITA NO,.752 OF 2007 DATED 22.09.2014 WHEREIN THE HONBL E KARNATAKA HIGH COURT IN THE CASE OF AN ARRACK CONTRACTOR WHO MADE PURCHASE FRO M THE GOVT. OF KARNATAKA CAME TO THE CONCLUSION THAT IN THE CASE OF PURCHASE OF C OUNTRY LIQUOR FROM THE STATE, THERE WAS NO REQUIREMENT TO PAY ANY SUCH PURCHASE ONLY IN CASH AS PER KARNATAKA EXCISE LICENCES (GENERAL CONDITIONS) RULES 1967 AND THEREF ORE THE TRIBUNAL WAS IN ERROR IN DELETING THE ADDITION MADE U/S 40A(3) OF THE ACT. T HE LD. DR ALSO SUBMITTED THAT THE EXCEPTIONS SPECIFIED UNDER RULE 6DD(B) OF THE RULES ALSO DID NOT APPLY BECAUSE THE BOTTLER DOES OR DID NOT INSIST ON PAYMENT IN CASH A LONE. HE ALSO SUBMITTED THAT RULE 6DD (K) IS ALSO NOT APPLICABLE BECAUSE THE BOTTLER OF THE GOVERNMENT CANNOT BE CONSIDERED AS PRINCIPAL OF THE STATE. 6. THE LD,. COUNSEL FOR THE ASSESSEE, ON THE OTHE R HAND, HOWEVER PLACED RELIANCE ON THE DECISION OF ITAT, KOLKATA IN THE CASE OF RAMNA GAR PACHWAI & C.S.(S)SHOP VS ITO IN ITA NO.148/KOL/2015 ORDER DATED 05.08.2016 W HEREIN THE ENTIRE ISSUE WITH REGARD TO THE APPLICABILITY TO RULE 6DD(B) AND RULE 6DD(K) IN THE CASE OF PURCHASE OF COUNTRY LIQUOR FROM THE STATE WAS DISCUSSED AND TH IS TRIBUNAL ULTIMATELY CAME TO THE CONCLUSION THAT EXCEPTIONS SPECIFIED IN RULE 6DD(V) AND RULE 6DD(K) WERE APPLICABLE IN THE CASE OF PURCHASE OF COUNTRY LIQUO R AND NO DISALLOWANCE CAN BE MADE U/S 40A(3) OF THE ACT. 7. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IN THE CASE OF THIS TRIBUNAL RAMNAGAR PACHWAI & C.S.(S)SHOP VS ITO (SUPRA) AFTER ANALYSING THE VARIOUS NOTIFICATIONS ISSUED BY THE EXCISE DEPARTME NT, GOVERNMENT OF WEST BENGAL IN CONNECTION WITH THE COUNTRY LIQUOR CAME TO THE FOLL OWING CONCLUSION : 15. WE FIND THAT THE FOLLOWING FACTS ARE UNDISPU TED AND INDISPUTABLE:- (A) THE TRANSACTIONS MADE BY THE ASSESSEE IS GENUIN E. ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 4 (B) THE IDENTITY OF THE RECEIVER (WHOLESALE LICENSE E) IS ESTABLISHED BEYOND DOUBT. ( C) THE PAYMENT IS MADE IN THE BANK ACCOUNT OF THE SELLER (WHOLESALE LICENSEE). WE HOLD THAT SINCE THE GENUINITY OF THE PAYMENTS MA DE TO THE M/S ASANSOL BOTTLING & PACKAGING CO. PVT. LTD (WHOLESALE LICENS EE) IS NOT DOUBTED BY THE REVENUE, THE PROVISIONS OF SECTION 40A(3) COULD NO T BE MADE APPLICABLE TO THE FACTS OF THE INSTANT CASE. IT IS OBSERVED THAT THE ASSESSEE HAD TAKEN ENOUGH PRECAUTIONS FROM ITS SIDE TO ENSURE THAT THE PAYEE ALSO DONT ESCAPE FROM THE AMBIT OF TAXATION ON THESE RECEIPTS BY DIRECTLY DEP OSITING THE CASH IN THE BANK ACCOUNT OF THE PAYEE. MOREOVER, THE REGULATIONS OF THE WEST BENGAL GOVERNMENT PURSUANT TO NOTIFICATION FROM ITS EXCISE DEPARTMENT DATED 29.8.2005 ALSO MANDATES THE PAYMENT TO BE MADE BY WAY OF DIRECT DE POSIT INTO THE BANK ACCOUNT OF THE WHOLESALE LICENSEE. THIS FACT IS ALSO NOT D ISPUTED BY THE REVENUE. 16. IT WILL BE PERTINENT TO GO INTO THE INTENTION BEHIND INTRODUCTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AT THIS JUN CTURE. WE FIND THAT THE SAID PROVISION WAS INSERTED BY FINANCE ACT 1968 WITH THE OBJECT OF CURBING EXPENDITURE IN CASH AND TO COUNTER TAX EVASION. TH E CBDT CIRCULAR NO. 6P DATED 6.7.1968 REITERATES THIS VIEW THAT THIS PROV ISION IS DESIGNED TO COUNTER EVASION OF A TAX THROUGH CLAIMS FOR EXPENDITURE SHO WN TO HAVE BEEN INCURRED IN CASH WITH A VIEW TO FRUSTRATING PROPER INVESTIGATIO N BY THE DEPARTMENT AS TO THE IDENTITY OF THE PAYEE AND REASONABLENESS OF THE PAY MENT. ............. 20. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALSO COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF A SHOK MONDAL VS ITO IN ITA NO. 873/KOL/2012 FOR ASST YEAR 2009-10 DATED 6. 2.2014, WHEREIN IT WAS HELD THAT :- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF THE DECISION IN THE CASE OF SMT.PUSHPALATA MONDAL SHOWS THAT THE TRIBUNAL HAD DECIDED THE CASE BY FOLLOWING THE DECISION OF HON'BLE KERALA HIGH CO URT IN THE CASE OF K.ABDU & CO. REFERRED TO SUPRA WHEREIN THE ISSUE WAS IN RELATION TO RULE 6DD (A) OF IT RULES. THE ISSUE IN THE ASESSEC'S CASE IS IN RESPECT OF THE PAYMENTS MADE UNDER THE R ULES FRAMED BY THE GOVERNMENT AND SUCH PAYMENT WAS REQUIRED TO BE MADE IN LEGAL TENDER. A PERUSAL OF THE GOVERNMENT NOTIFICATION ISSUED BY THE GOVT. OF WEST BENGAL CLEARLY SHOWS TH AT THE DEALERS ARE AGENTS OF THE GOVERNMENT AND THE PAYMENTS MADE ARE TO THE GOVERNM ENT. IT ALSO MAKES IT CATEGORICALLY REQUIRED THAT THE PAYMENT IS TO BE MADE BEFORE LIFT ING OF THE COUNTRY SPIRIT. CONSEQUENTLY WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.AMRAI PACHWAI & C. S.SHOP REFERRED TO SUPRA WHEREIN IT HAS BEEN HELD AS FOLLOWS :- '6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS RECO GNIZED THE ASSESSEE'S BUSINESS IN TRADING OF COUNTRY SPIRIT AND COUNTRY LIQUOR. COPY OF FORM OF LICENCE ISSUED BY ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 5 DURGAPUR MUNICIPAL CORPORATION AND COPY OF FORM III ISSUED BY DEPARTMENT OF EXCISE, GOVT. OF W.B. WERE ALSO FOUND AT PAGES 177 AND 179 OF THE ASSESSEE'S PAPER BOOK. IN ANY CASE THE VALIDITY OF LICENCE OF THE ASSESSEE TO TRADE IN COUNTRY SPIRIT AND COUNTRY LIQUOR IS NOT THE ISSUE BEFORE US. THE ISSUE IS WHE THER THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY SPIRIT FROM TH E TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES LTD., CITY CENTRE, DURGAPUR FAL LS WITHIN THE EXEMPTION PROVIDED UNDER RULE 6DD(B) OF THE I.T.RULES, 1962. ADMITTEDL Y, THE AO HAS RECOGNIZED THAT THE PROVISION OF RULE 6DD(B) OF THE I.T RULES, 1962 IS APPLICABLE IN CASE OF PAYMENTS MADE TO GOVERNMENT DIRECTLY. THIS IS FOUND IN PAGE 2 OF THE ASSESSMENT ORDER. A PERUSAL OF THE KOLKATA GAZETTE TUESDAY 20 TH SEPT 2005 SHOWS THAT THE GOVERNMENT OF WEST BENGAL, DEPARTMENT OF EXCISE HAS ISSUED A NOTIFICAT ION, WHEREIN THE WAREHOUSE HAS BEEN IDENTIFIED TO MEAN THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO THE RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE CO MMISSIONER AT THE EXPENSE OF THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HA S BEEN GRANTED U/S 22 OF THE ACT OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT. FURTHE R, IT HAS BEEN SPECIFICALLY IDENTIFIED THAT THE AUTHORISED REPRESENTATIVE OF THE WHOLESALE LICENSEE SHALL REALIZE THE NECESSARY AMOUNT OF DUTY, COST PRICE AND BOTTLING CHARGE, IF THERE BE ANY, AT THE PRESCRIBED RATE AND SUCH OTHER IMPOSITION, AS MAY BE PRESCRIBED BY LAW, FROM THE RETAIL VENDOR TO WHOM THE COUNTRY SPIRIT IS TO BE ISSUED FROM THE C ONCERNED WAREHOUSE. IT IS ALSO SPECIFICALLY MENTIONED IN SECTION (2) OF THE SAID N OTIFICATION THAT NO RETAIL VENDOR OF COUNTRY SPIRIT SHALL DEPOSIT DUTY DIRECT INTO THE L OCAL TREASURY FOR ISSUE OF COUNTRY SPIRIT TO BE TAKEN BY HIM FROM THE WAREHOUSE CONCERNED WHI CH CLEARLY SHOWS THAT THE WAREHOUSE IS FOR THE SUPPLY OF THE COUNTRY LIQUOR, SPECIFICALLY, THE WAREHOUSE IS UNDER THE DIRECT CONTROL AND CUSTODY OF THE STATE GOVT. T HE STATE GOVERNMENT HAS CLOSED ITS DOORS IN SO FAR AS THE LOCAL TREASURY IS CONCERNED AND THE PAYMENT FOR THE PURCHASE OF COUNTRY SPIRIT OR COUNTRY LIQUOR HAS TO BE MADE TO THE WAREHOUSE, RUN BY THE GOVERNMENT. THIS SHOWS THAT ANY PAYMENT MADE TO THE WAREHOUSE, WHICH IS UNDER THE DIRECT CONTROL OF THE STATE GOVERNMENT, IS A PAYMEN T MADE DIRECTLY TO THE GOVERNMENT. ONCE, THIS IS ACCEPTED THEN THE PROVISIONS OF RULE 6DD(B) OF THE I.T RULES, 1962 WHICH CLEARLY SPELLS OUT THAT THE PAYMENT MADE TO THE GOV ERNMENT IN LEGAL TENDER UNDER THE RULES FRAMED BY THE GOVERNMENT, IS EXEMPTED FROM TH E RIGOURS OF SECTION 40A(3) OF THE ACT. HERE, IT IS NOTICED THAT THE PAYMENTS MADE BY THE ASSESSEE FOR PURCHASE OF COUNTRY SPIRIT AND COUNTRY LIQUOR IS TO THE GOVERNM ENT AS PER THE NOTIFICATION ISSUED BY THE GOVERNMENT AND IS IN LEGAL TENDER SPECIFIED BY THE NOTIFICATION. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESSEE FOR THE PURCHASE OF COUNTRY LIQUOR AND COUNTRY SPIRIT FROM THE TERRITORIAL LICENSEE BOTTLING PLANT, IFB AGRO INDUSTRIES LTD., CITY CENTRE, DURGA PUR IS PROTECTED BY THE EXEMPTION IN TERMS OF RULE 6DD(B) OF THE 1.T.RULES 1962. IN THE CIRCUMSTANCES, THE ADDITION AS MADE BY THE AO AND AS CONFIRMED BY THE ID. CIT(A) BY INV OKING THE PROVISIONS OF SECTION 40A(3) OF THE I. T.ACT 1961 STANDS DELETED. 8. IN THE RESULT THE ADDITION AS CONFIRMED BY THE I D. CIT(A) STANDS DELETED. WE FIND THAT THIS DECISION WAS RENDERED BY PLACING RELIANCE ON ITS EARLIER DECISION IN THE CASE OF M/S AMRAI PACHWAI & C.S.SHO P IN ITA NO. 1251/KOL/2011 DATED 15.1.2014 AND AFTER CONSIDERING THE CONTRARY DECISIONS RENDERED IN THE CASE OF PUSHPALATA MONDAL IN ITA NO . 965/KOL/2010 DATED 28.7.2011 AND HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS K ABDU & CO (170 TAXMAN 297). WE FIND THAT THE CO-ORDINATE B ENCH DECISION IN THE CASE OF ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 6 M/S AMRAI PACHWAI & C.S.SHOP IN ITA NO. 1251/KOL/20 11 DATED 15.1.2014 AND THE HELD PORTION IS REPRODUCED HEREINABOVE. 21. WE FIND THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD IS A BOTTLING PLANT CUM WAREHOUSE UNDER RULE 2(VII) OF THE WEST B ENGAL EXCISE RULES 2005 WITH PRIVILEGE GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO GO INTO THE DEFINITION OF WARE HOUSE AS PROVIDED UNDER THE STATE EXCISE RULES 2005 AS BELOW:- WAREHOUSE , UNDER RULE 2(VII) OF THE W.B.EXCISE RU LES 2005 , MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENSE OF THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM THE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HAS B EEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE VENDOR OF COUNTRY SPIRIT. THE ABOVE DEFINITION MAKES IT CLEAR THAT THE WAREH OUSE REFERRED TO UNDER THE STATE EXCISE RULES IS UNDER THE DIRECT CONTROL AND AUTHORITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT IS ESTABLISHED BY THE CO MMISSIONER OF STATE EXCISE AND AS SUCH IS A STATE GOVERNMENT ESTABLISHMENT. IT IS ALSO PERTINENT TO NOTE THAT THE EXPENDITURE IN RELATION TO SUCH WAREHOUSE IS BORNE BY THE STATE GOVERNMENT OR BY THE LICENSEE TO WHOM THE EXCLUSIVE PRIVILEGE IS GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. HENCE THERE COULD BE NO DOUBT TH AT THE WAREHOUSE IS ESTABLISHED BY THE STATE EXCISE COMMISSIONER. HENC E IT COULD BE SAFELY CONCLUDED THAT THE WAREHOUSE SO ESTABLISHED BY THE STATE EXCISE COMMISSIONER IS A STATE GOVERNMENT ESTABLISHMENT. IT WOULD ALSO B E PERTINENT TO NOTE THAT THE SAID WAREHOUSE HAS BEEN SPECIFICALLY ESTABLISHED FO R SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS (ASSESSEE HEREIN) ONLY AND NOT TO AN YBODY ELSE. IT WOULD BE PERTINENT TO LOOK INTO THE DEFINITION O F WHOLESALE LICENSEE AS PER RULE 2(VIII) OF THE EXCISE RULES 2005 AS BELOW:- RULE 2(VIII) WHOLESALE LICENSEE MEANS THE WHOL ESALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENCE HAS BEEN GRANTED IN WEST BEN GAL EXCISE FORM NO. 26. IT WOULD BE PERTINENT TO LOOK INTO SECTION 22 OF TH E BENGAL EXCISE ACT, 1909 AT THIS JUNCTURE AS BELOW:- SECTION 22 GRANT OF EXCLUSIVE PRIVILEGE OF MANUFA CTURE AND SALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS (1) THE STATE GOVERNMENT MAY GRANT TO ANY PERSON, ON SU CH CONDITIONS AND FOR SUCH PERIOD AS IT MAY THINK FIT, THE EXCLUSIVE PRIV ILEGE (A) OF MANUFACTURING, OR SUPPLYING BY WHOLESALE, OR (B) OF MANUFACTURING, AND SUPPLYING BY WHOLESALE, OR (C) OF SELLING, BY WHOLESALE OR RETAIL, OR ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 7 (D) OF MANUFACTURING OR SUPPLYING BY WHOLESALE AND SELL ING RETAIL, OR (E) OF MANUFACTURING AND SUPPLYING BY WHOLESALE AND SEL LING RETAIL, ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPECIFIED LOCAL AREA: PROVIDED THAT PUBLIC NOTICE SHALL BE GIVEN TO THE I NTENTION TO GRANT ANY SUCH EXCLUSIVE PRIVILEGE, AND THAT ANY OBJECTIONS MADE B Y ANY PERSON RESIDING WITHIN THE AREA AFFECTED SHALL BE CONSIDERED BEFORE AN EXC LUSIVE PRIVILEGE IS GRANTED. (2) NO GRANTEE OF ANY PRIVILEGE UNDER SUB-SECTION ( 1) SHALL EXERCISE THE SAME UNLESS OR UNTIL HE HAS RECEIVED A LICENSE IN THAT B EHALF FROM THE COLLECTOR OR THE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD (BOTTLING PLANT) IS A WAREHOUSE WITHIN THE MEANING OF RULE 2(VII) OF THE EXCISE RULES 2005 AND SAID WAREHOUSE IS A STATE GOV ERNMENT ESTABLISHMENT, ESTABLISHED AND CONTROLLED BY THE EXCISE COMMISSION ER . IT WOULD BE RELEVANT TO REPRODUCE RULE 6DD(B) OF THE IT RULES AT THIS JUNCT URE :- (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND , UNDER THE RULES FRAMED BY IT, SUCH PAYMENT IS REQUIRED TO BE MADE IN LEGAL TE NDER. IN THE INSTANT CASE, THE ASSESSEE (RETAIL VENDOR) HAD MADE CASH PAYMENTS FOR PURCHASE OF COUNTRY SPIRIT BY DEPOSITING CASH DIREC TLY INTO THE BANK ACCOUNT OF M/S ABPL AS PER RULE 6(2) OF THE EXCISE RULES 2005 , IT HAS TO BE CONSTRUED AS PAYMENT MADE TO THE STATE GOVERNMENT AUTHORITY AND ACCORDINGLY FALLS UNDER THE EXCEPTION PROVIDED IN RULE 6DD(B) OF THE IT RULES. 22. IT IS NOT IN DISPUTE THAT M/S ASANSOL BOTTLIN G & PACKAGING CO. PVT LTD HAVE BEEN GRANTED LICENCE TO ACT AS A WHOLESALER FOR SUP PLY OF COUNTRY LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTMENT , GOVERNMENT OF WEST BENGAL. AT THE COST OF REPETITION, WE WOULD L IKE TO STATE THAT THE SAID REGULATION MANDATED THE PAYMENTS TO BE MADE DIRECTL Y INTO THE BANK ACCOUNT OF THE SAID WHOLESALE LICENSEE BY THE RETAIL VENDOR (I .E ASSESSEE HEREIN) FOR STRICT AND EFFECTIVE REGULATION OF THE COUNTRY LIQUOR AND FOR PREVENTION OF SPURIOUS STOCKS AND BLACK MARKETING TRANSACTIONS FROM THE SA ME. HENCE IT COULD BE SAFELY CONCLUDED THAT THE SAID WHOLESALE LICENSEE HAD ACTE D AT THE INSTANCE OF THE STATE GOVERNMENT. ONCE THIS IS SO, THEN THE SAID WHOLES ALE LICENSEE COULD BE CONSTRUED AS AN AGENT OF THE STATE GOVERNMENT. FO R THE SAKE OF CONVENIENCE, THE RELEVANT RULE IS REPRODUCED HEREUNDER:- RULE 6DD(K) WHERE THE PAYMENT IS MADE BY ANY PERS ON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS O R SERVICES ON BEHALF OF SUCH PERSON. ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 8 THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO T HE PRINCIPAL, GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGENT. THE RELAT IONSHIP BETWEEN THE ASSESSEE (AUTHORIZED RETAILER) AND GOVERNMENT OF WEST BENGAL (THE SUPPLIER) ACTING UNDER WEST BENGAL EXCISE RULES THROUGH ITS AUTHORISED WHO LESALER LICENSEE (AGENT), BOTH DE FACTO AND DEJURE , IS ONE OF PRINCIPAL AN D AGENT. WE HOLD THAT THE ASSESSEE RETAIL VENDOR HAD MADE PAYMENT TO THE SAID AGENT (WHOLESALE LICENSEE) WOULD FALL UNDER THE EXCEPTION PROVIDED IN RULE 6DD (K) OF THE RULES. ............ 24. WE HOLD FROM THE AFORESAID FINDINGS THAT THE ASSESSEES CASE FALLS UNDER THE EXCEPTIONS PROVIDED IN RULE 6DD(B) AND RULE 6DD (K) OF THE RULES. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES AND RESPEC TFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HAVE NO HESI TATION IN DELETING THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT IN ALL THE YEARS UNDER APPEAL. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR ALL THE YEARS UNDER APPEAL ARE ALLOWED. 8. IT IS NO DOUBT TRUE THAT TO AVOID DISALLOWAN CE U/S 40A(3) OF THE ACT THE ASSESSEE HAS TO MAKE OUT A CASE OF EXCEPTION WITHIN THE PARA METERS OF RULE 6DD. IT IS CLEAR FROM THE DECISION OF THE TRIBUNAL RENDERED IN THE C ASE OF RAMNAGAR PACHWAI & C.S.(S)SHOP VS ITO (SUPRA) THAT IN THE BUSINESS OF COUNTRY LIQUOR EVEN WHEN PURCHASES ARE MADE FROM THE STATE, PAYMENT IN CASH FOR SUCH PURCHASES WOULD BE COVERED WITHIN THE EXCEPTIONS UNDER RULE 6DD(B) AND RULE 6DD(K). AS FAR AS THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN T HE CASE OF PANDURANGA ENTERPRISES (SUPRA) RELIED UPON BY THE LD. DR IS CONCERNED, THA T WAS A CASE WHICH DEALT WITH THE PROVISION OF RULE 14 OF KARNATAKA EXCISE LICENCE RU LES. THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF RAMNAGAR PACHWAI & C.S.(S)S HOP VS ITO (SUPRA) DEALT WITH SPECIFIC EXCISE RULES APPLICABLE TO THE STATE OF W EST BENGAL. WE ARE THEREFORE OF THE VIEW THAT THE DISALLOWANCE U/S 40A(3) OF THE ACT HA S TO BE DELETED AS THE FACTS OF THE ASSESSEES CASE ARE IDENTICAL TO THE FACTS OF THE C ASE DECIDED BY THE TRIBUNAL IN THE CASE OF RAMNAGAR PACHWAI & C.S.(S)SHOP VS ITO (SUPRA). W E ACCORDINGLY DIRECT THAT THE ADDITION MADE U/S 40A(3) OF THE ACT BE DELETED. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. ITA NO.1005/KOL/2016 SRI PRABIR KUMAR MALLICK A. Y.2010-11 9 9. IN THE RESULT THE APPEAL BY THE ASSESSEE IS A LLOWED. O RDER PRONOUNCED IN THE COURT ON 25.08.2017. SD/- SD/- [WASEEM AHMED ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25.08.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI PRABIR KUMAR MALLICK, PROP. M/S. SEARSOLE C. S.SHOP, N S B ROD, RANIGANJ, DIST. BURDWAN 713347. 2.I.T.O.-WARD-3 (1), ASANSOL. 3. C.I.T.(A)- ASANSOL 4. C.I.T- ASANSO L 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES