Jt CIT, Trivandrum V. Kerala State Beverages (M&M) Corpn Ltd, Trivandrum

ITA 132/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90768 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 19-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Section: 43B; 37

Judgement Text

1 ITA NO .132-134/COCH/2015 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI V DURGA RAO, JM AND SHRI B.R. BASKARAN, AM I.T.A. NO. 132 TO 134/COCH/2015 (ASSESSMENT YEARS : 2007-08, 2008-09 & 2011-12) JT CIT, SPECIAL RANGE VS KERALA STATE BEVERAGES TRIVANDRUM (M&M) CORPORATION LTD SASTHAKRIPA COMPLEX SASTHAMANGALAM TRIVANDRUM-10 PAN : AAACK9431G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M ANIL KUMAR, CIT RESPONDENT BY : NONE, ADJ APPLN FILED DATE OF HEARING : 14-05-2015 DATE OF PRONOUNCEMENT : 15-05-2015 O R D E R PER SHRI V DURGA RAO, JM THESE THREE APPEALS FILED BY THE REVENUE ARE DIREC TED AGAINST THE INDEPENDENT ORDERS PASSED BY THE COMMISSIONER OF IN COME-TAX (APPEALS), TRIVANDRUM FOR THE ASSESSMENT YEARS 2007-08, 2008-0 9 AND 2011-12. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CO MPANY ENGAGED IN THE BUSINESS OF WHOLESALE AND RETAIL TRADING OF INDIAN MADE FOREIGN LIQUOR AND BEER IN THE STATE OF KERALA. THE ASSESSING OFFICER MADE AN ADDITION OF RS.230,97,34,191 IN RESPECT OF SURCHARGE ON SALES-TAX AND TURNOVER T AX. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LD.CIT(A) BY FOLLOWING THE DECISION OF THE 2 ITA NO .132-134/COCH/2015 CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THI S TRIBUNAL. 3. NONE APPEARED FOR THE ASSESSEE; HOWEVER, FILED A N ADJOURNMENT APPLICATION WHICH IS REJECTED. THE LD.DR, ON THE O THER HAND, SUPPORTED THE ORDERS PASSED BY THE ASSESSING OFFICER. 4. AFTER HEARING THE LD.DR AND NON CAREFUL CONSIDER ATION OF THE ASSESSMENT ORDERS AS WELL AS THE ORDERS OF THE CIT(A) WE FIND THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEARS 2009-10 AND 2010-11. THE LD.CIT(A) BY FOLLOWING THE SAME H AS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: 5. THE ONLY ONE ISSUE RAISED IN THE GROUNDS OF APP EAL IS THAT THE DISALLOWANCE OF SURCHARGE ON SALES TAX AND TURN OVER TAX AMOUNTING TO RS.230,97,34,191 IS OPPOSED TO LAW AND FACTS OF THE CASE. ACCORDING TO ASSESSING OFFICER, ANY PAYMENT MADE ON ACCOUNT OF SURCHARGE ON SALES TAX AND TURNOVER TAX CANNOT BE CLAIMED S AN EXPENDITURE ALLOWABLE U/S 37 OF THE IT ACT AS THE SAME IS TO BE COLLECTED FROM THE BUYER OF THE PRODUCT AN D SHOULD NECESSARILY BE APPROPRIATED OUT OF THE PROFIT STILL LEFT WITH AFTER OFFERING THE INCOME FOR TAX. BUT, DURING THE COURS E OF APPELLATE PROCEEDINGS, APART FROM ARGUING THAT THE PAYMENT OF SURCHARGE ON SALES TAX AND TURNOVER TAX WAS MADE WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF THE BUSINESS CARRIED OUT BY THE APPE LLANT, THE APPELLANTS REPRESENTATIVE HAS INFORMED THAT THE HO NBLE ITAT, COCHIN BENCH, COCHIN IN ITS ORDER IN ITA NO.65 & 66 /COCH/2014 DATED 28.8.2014 IN THE APPELLANTS OWN CASE FOR THE AYS 2009-10 AND 2010-11 HAS ALREADY DECIDED THE IDENTICAL ISSUE OF SURCHARGE 3 ITA NO .132-134/COCH/2015 ON SALES TAX AND TURNOVER TAX IN FAVOUR OF THE APPE LLANT AND THEREBY REQUESTED TO FOLLOW THE DECISION METICULOUS LY FOR THE AY 2007-08 AS WELL. I HAVE GONE THROUGH THE ORDER OF THE HONBLE ITAT REFERRED ABOVE. TO UNDERSTAND RIGHTLY, RELEVANT PO RTION OF THE ORDER OF THE HONBLE ITAT IS REPRODUCED AS UNDER, 15. WE HAVE HEARD BOTH PARTIES AND PERUSED THE REC ORD. ADMITTEDLY, IN THIS CASE, THERE IS NO DISPUTE BY TH E DEPARTMENT THAT THE STATE GOVERNMENT HAS MADE ANY AMENDMENT TO THE ACT SO AS TO WRITE BACK THE ENTIRE PROFIT OF THE ASSESSEE TO THE STATE GOVERNMENT. UNDER THE ST ATE GOVERNMENT ACT, PART OF SURCHARGE ON SALES TAX AND TURNOVER TAX IS TO BE PAID BY THE ASSESSEE TO THE GOVERNMENT . THE MOMENT THE ASSESSEE MAKES SALES WHICH ARE SUBJECT T O SURCHARGE ON SALES TAX AND TURNOVER TAX, THE OBLIGA TION OF THE ASSESSEE IS TO AY TAX AND TAX IS ATTRACTED. IN THE PRESENT CASE, THE ASSESSEE QUANTIFIED THE LIABILITY. IF IT IS PAID WITHIN THE DUE DATE, THE PAYMENT OF THE SAME IS TO BE ALLO WED IN TERMS OF SECTION 43B OF THE IT ACT. THE ASSESSEE W HO FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING I ENTIT LED TO DEDUCT SALES TAX FROM THE PROFIT AND GAINS OF THE B USINESS WHICH HAD ACCRUED DURING THE FINANCIAL YEAR RELEVAN T TO THE ASSESSMENT YEAR SUBJECT TO THE PROVISIONS OF SECTIO N 43B OF THE IT ACT. WHILE COMPUTING THE PROFIT AND GAINS O F THE BUSINESS, WHETHER THE ASSESSEE IS ENTITLED TO A PAR TICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISIONS OF L AW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGH T TAKE OF ITS RIGHTS NOR CAN THE EXISTENCE OR ABSENCE OF E NTRIES IN ITS BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE M ATTER. SINCE THE ASSESSEE IS FOLLOWING THE MERCANTILE SYST EM OF ACCOUNTING, THE ASSESSEE IS FULLY JUSTIFIED IN CLAI MING DEDUCTION TOWARDS SURCHARGE ON SALE TAX AND TURNOVE R TAX WHICH IS PAYABLE IN THE FINANCIAL YEAR CORRESPONDIN G TO THE RELEVANT ASSESSMENT YEAR. ACCORDINGLY, WE ARE INCL INED TO HOLD THAT THE CLAIM OF THE ASSESSEE IS TO BE ALLOWE D. 6. THE APPELLANT IS AN ASSESSEE AS PER THE PROVISIO NS OF THE KERALA GENERAL SALES TAX ACT, 1963 AND IS BOUND TO FOLLOW ALL THE PROVISIONS OF THE ABOVE ACT. THE APPELLANT OUGHT T O PAY VARIOUS DUTIES AND LEVIES AS PER THE PROVISIONS OF THE ABOV E ACT. THE APPELLANT OUGHT TO PAY VARIOUS DUTIES AND LEVIES S PER THE PROVISIONS OF THE ABOVE ACT AS WELL AS KERALA ABKAR I ACT AND ALLIED RULES. SALES TAX, TURNOVER TAX AND SURCHARGE ON SA LES TAX ARE TO BE PAID BY THE APPELLANT AS A WHOLESALE TRADER O F INDIAN MADE FOREIGN LIQUOR AND BEER IN THE STATE OF KERALA TO T HE GOVERNMENT OF KERALA IN ACCORDANCE WITH THE PROVISIONS OF THE KERALA GENERAL 4 ITA NO .132-134/COCH/2015 SALES TAX ACT, 1963 AND THE KERALA SURCHARGE ON TAX ES ACT, 1957. SECTION 3(1) OF THE KERALA SURCHARGE ON TAXES ACT S TATES THAT THE TAXES PAYABLE UNDER 5(1) OF THE KERALA GENERAL SALE S TAX ACT BY A DEALER IN INDIAN MADE FOREIGN LIQUOR SHALL BE INCRE ASED BY A SURCHARGE AT THE RATE OF 10%. AGAIN, UNDER SECTION 3(2) OF THE KERALA SURCHARGE ON TAXES ACT, NO DEALER SHALL BE E NTITLED TO COLLECT THE SURCHARGE PAYABLE UNDER THE ABOVE MENTI ONED SECTION 3(1) FROM THE BUYER OF FOREIGN LIQUOR. FURTHER, SE CTION 3(3) OF THE KERALA SURCHARGE ON TAXES ACT STATES THAT ANY DEALE R WHO COLLECT SURCHARGE FROM THE BUYER OF FOREIGN LIQUOR IN CONTR AVENTION OF THE PROVISIONS OF THE SAID SECTION 3(2) SHALL BE PUNISH ABLE WITH FINE WHICH MAY EXTENT UPTO ONE THOUSAND RUPEES AND NO CU RT BELOW THE RANK OF FIRST CLASS MAGISTRATE SHALL TRY ANY SUCH O FFENCE. THE ABOVE PROVISIONS OF LAW CLEARLY STATES THAT ANY DEA LER IN FOREIGN LIQUOR IS BOUND TO REMIT SURCHARGE ON SALES TAX AND CANNOT DO BUSINESS WITHOUT REMITTANCE OF SURCHARGE. IT ALSO CLEARLY STATES THAT THE SURCHARGE ON SALES TAX CANNOT BE COLLECTED FROM THE BUYER OF FOREIGN LIQUOR AND THE DEALER WHO COLLECTS SURCHARG E ON SALES TAX CONTRAVENING THE PROVISIONS OF SECTION 3(2) WOULD B E EXPOSED TO PENAL PROVISIONS. IN THE BACKGROUND OF THE FOREGO ING, IT COULD BE EASILY MADE OUT THAT THE APPELLANT IS OBLIGATED TO PAY SURCHARGE ON SALE OF INDIAN MADE FOREIGN LIQUOR BUT THE SAME SHO ULD NOT BE COLLECTED FROM THE BUYER OF FOREIGN LIQUOR. PAYMEN T OF SURCHARGE IS A MUST TO CARRY OUT THE BUSINESS. IN THE MEANTIME SURCHARGE CANNOT BE COLLECTED FROM THE BUYER. AS THE BUSINES S CANNOT BE CARRIED OUT WITHOUT REMITTANCE OF SURCHARGE, THE SA ME SHOULD NECESSARILY BE PAID BY THE APPELLANT AND MUST BE PA ID OUT OF SALE PROCEEDS ONLY. SIMILARLY, AS PER THE PROVISIONS OF SECTION 5(1)(B) OF THE KERALA GENERAL SALES TAX ACT, 1963 THE APPELLAN T IS LIABLE TO PAY TURNOVER TAX AT THE POINT OF SALE. FURTHER, BY VIRTUE OF THE PROVISIONS OF SECTION 5(2)(II) OF THE SAID ACT, NO DEALER SHALL COLLECT FROM HIS PURCHASER OF FOREIGN LIQUOR THE TURNOVER T AX PAYABLE BY HIM. THE ABOVE PROVISIONS OF LAW CLEARLY STATES TH AT THE APPELLANT IS LIABLE TO PAY TURNOVER TAX AT THE POINT OF SALE AND CANNOT COLLECT THE SAME FROM THE PURCHASER. THE TURNOVER TAX THE APPELLANT CLAIMED TO HAVE BEEN PAID THEREFORE IS TOWARDS DISC HARGING THE STATUTORY LIABILITY VESTED UPON IT. IN VIEW OF THE ABOVE, THE SURCHARGE ON SALES TAX AND TURNOVER PAID BY THE APP ELLANT SHOULD NECESSARILY BE CONSTRUED AS PAID WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS AND ALSO TO COMPLY WITH THE PRO VISIONS OF STATUTE ENACTED BY THE GOVERNMENT OF KERALA. HENCE , THE SAME IS AN ALLOWABLE EXPENDITURE U/S 37 OF THE IT ACT. FUR THER, THE APPELLANT WHO FOLLOWS MERCANTILE SYSTEM OF ACCOUNTI NG IS ALSO ENTITLED TO CLAIM DEDUCTION TOWARDS SURCHARGE ON SA LES TAX AND TURNOVER TAX IN ACCORDANCE WITH THE PROVISIONS OF S ECTION 43B OF THE IT ACT, THE FACT OF WHICH HAS ALREADY BEEN CONFIRME D BY THE HONBLE 5 ITA NO .132-134/COCH/2015 ITAT, COCHIN BENCH IN THE ORDER PASSED FOR THE AYS 2009-10 AND 2010-11 IN THE APPELLANTS OWN CASE S MENTIONED IN PARA 5 OF THIS ORDER. 7. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE ITAT, COCHIN BENCH, COCHIN PASSED VIDE ITA NO.65 & 66/COCH/2014 DATED 28.08.2014 IN THE APPELLANTS OW N CASE FOR THE AYS 2009-10 AND 2010-11, THE DISALLOWANCE MADE FOR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF SURCHARGE ON SALE S AND TURNOVER IS DELETED AS THE ISSUE IS IDENTICAL. NO MATERIAL HAS BEEN BROUGHT TO OUR NOTICE TO SHOW THAT THE ABOVE DECISION OF THE TRIBUNAL HAS BEEN REVERSED OR MODIFIED BY THE H IGH COURT. WE FIND NO INFIRMITY IN THE ORDERS PASSED BY THE LD.CIT(A). T HESE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 15 TH DAY OF MAY, 2015. SD/- SD/- ( B.R. BASKARAN) ( V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 15 TH MAY, 2015 PKJ/- COPY TO: 1. JT.CIT, SPECIAL RANGE, TRIVANDRUM 2. KERALA STATE BEVERAGES (M&M) CORPORATION LTD, SA STHAKRIPA COMPLEX, SASTHAMANGALAM, THIRUVNANTHAPURAM 695 010 3. THE CIT, TRIVANDRUM 4. THE CIT(A), TRIVANDRUM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, COCHIN BENCH