M/s. A.P. Bevarages Corporation, Hyderabad V. ITO, Ward 1(1), Hyderabad

ITA 545/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74471 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M RAVINDRA SAI
• Assessee Lawyers: K VASANT KUMAR A V RAGHU RAM
• Keywords: Gift; Business income; Depreciation; Business expenditure; Opportunity of being heard; Diversion of income; Retrospective amendment; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 43B; 115JB; 80IB; 80G; 63; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.302-303 & 545/HYD/13 ASSESSMENT YEARS: 2006-07, 2008-09 & 2009-10. ANDHRA PRADESH BEVERAGES -VS- ITO, WARD-1(1) CORPORATION LTD., HYDERABAD. HYDERABAD. PAN:AABCA 7385 A (APPELLANT) (RESPONDENT) APPELLANT BY S/ SHRI K. VASANT KUMAR A.V. RAGHU RAM RESPONDENT BY SHRI M. RAVINDRA SAI (DR) DATE OF HEARING 22 - 11 - 2013. DATE OF PRONOUNCEMENT 21 - 0 1 - 2014 ORDER PER SAKTIJIT DEY, J.M: THESE ARE THREE APPEALS FILED BY THE ASSESSEE. W HILE APPEALS FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 ARE AG AINST SEPARATE ORDERS OF CIT (A), HYDERABAD, THE APPEAL PERTAINING TO THE ASSESSMENT YEAR 2006-07 IS AGAINST THE ORDER PASSED U/S263 OF THE ACT. SINCE ASSESSEE IS COMMON, AND IDENTICAL ISSUES ARE INVOLVED IN 2 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. THESE THREE APPEALS, THESE ARE HEARD, CLUBBED TOGET HER AND DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE. 2. THOUGH FACTS ARE IDENTICAL AND ISSUES ARE COM MON IN ALL THE APPEALS, SINCE THE ASSESSEE HAS MADE HIS SUBMISSION S IN RESPECT OF APPEAL IN ITA NO.302/HYD/13 RELATING TO THE ASSESSM ENT YEAR 2008- 09, WE WILL DEAL WITH THE FACTS AS INVOLVED IN THIS APPEAL. 3. BRIEFLY THE FACTS AS EMANATE FROM RECORDS ARE, T HE ASSESSEE COMPANY IS SOLE WHOLESALE DISTRIBUTOR OF ALCOHOLIC PRODUCTS IN THE STATE OF ANDHRA PRADESH. WHILE EXAMINING THE RETURN FILED FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER NOT ICED THAT THOUGH THE ASSESSEE HAD DECLARED A TURNOVER OF RS.8 348.05 CRORES FOR THE IMPUGNED ASSESSMENT YEAR, BUT IT HAS DECLAR ED NIL INCOME UNDER THE REGULAR PROVISIONS AND BOOK PROFIT OF RS. 2,85,642/- U/S 115JB OF THE ACT. HE FURTHER NOTED THAT IN THE ANN UAL REPORT THE ASSESSEE DISCLOSED LOSS OF RS.36,82,862/-. HE FURT HER NOTED THAT ON ACCOUNT OF PRIOR PERIOD ADJUSTMENT , A PROFIT OF RS .10,14,478/- WAS SHOWN FOR INCOME-TAX PURPOSES. THE ASSESSEE ALSO A DDED BACK THE INADMISSIBLES SUCH AS CAPITAL EXPENDITURE, DONATIO N TO CHIEF MINISTERS RELIEF FUND AND 40A(IA). AFTER CLAIMING CERTAIN ALLOWANCES U/S 43B ON PAYMENT BASIS, IT DISCLOSED A GROSS TOTA L INCOME OF RS.1348.27 CRORES AND AFTER CLAIMING DEDUCTION U/S 80G THE INCOME WAS BROUGHT DOWN TO NIL. THE ASSESSING OFFICER FO R THE PURPOSE OF UNDERSTANDING THE EXACT NATURE OF ACTIVITY CARRIED ON BY THE ASSESSEE AND TO ASCERTAIN ITS MARGIN MADE A QUERY A S TO HOW AND AT WHAT RATE IT PROCURES ITS SUPPLIES AND AT WHAT RATE IT SOLD THE GOODS. HE FURTHER CALLED UPON THE ASSESSEE TO EXPLAIN THE POLICY FOLLOWED WITH RESPECT TO PURCHASE AND SALES AND THE MARGINS FIXED. THE ASSESSEE IN ITS REPLY DATED 22-10-2010 STATED THAT THE PURCHASE 3 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. PRICE IS FIXED BY THE TENDER COMMITTEE FORMED BY TH E GOVERNMENT. HE FURTHER STATED THAT THE TENDER COMMITTEE IS CONS TITUTED AND AN OPEN TENDER NOTIFICATION IS ISSUED THROUGH PRESS FO R SUPPLY OF IMFL AND BEER ON RATE CONTRACT BASIS TO THE CORPORATION. SO THE COMPANY PROCURES THE PRODUCTS FROM THE SUPPLIERS ON THE PRICE FIXED BY THE COMMITTEE THROUGH AN OPEN TENDER NOTIFICATIO N. MARGIN OVER THE COST PRICE ON EACH BRAND IS FIXED BY THE GOVERN MENT OF ANDHRA PRADESH THROUGH THEIR G.O. THE MANNER IN WHICH THE RATE IS FIXED IS INDICATED IN ONE OF THE GOS DATED 11-11-2009. THE A SSESSING OFFICER ON PERUSING THE SAID GO NOTED THAT ABOVE BASIC COS T PRICE, THE MARGIN WILL GO UP TO EVEN 38%. THEREFORE IN ESSENCE BOTH THE PURCHASE PRICE AND SALE PRICE ARE DETERMINED BY THE GOVERNMENT OF A.P AND THE MARGIN IS ALSO SEPARATELY DETERMINED BY THE GOVERNMENT. OF A.P. THE ASSESSING OFFICER ON GOIN G THROUGH THE COMPUTATION OF LOSS DECLARED IN THE ANNUAL RETURN NOTICED THAT AFTER REDUCING THE COST OF PURCHASE OF IMFL AMOUNTING TO RS.3516 CRORES FROM THE TOTAL TURNOVER OF RS.8646 CRORES, THE ASSE SSEE HAS CLAIMED THE REST OF THE MAJOR EXPENDITURE UNDER THE FOLLOWI NG THREE HEADS. I) PRIVILEGE FEE TO THE GOVERNMENT. OF A.P. RS.14 15.28 CRORES II) CHIEF MINISTERS RELIEF FUND RS.138.29 CRORE S III) SALES TAX RS.3331.64 CRORES 4. OUT OF THE ABOVE EXPENDITURE CLAIMED, THE ASSESS ING OFFICER ACCEPTED THE EXPENDITURE TOWARDS SALES-TAX AS AN AD MISSIBLE DEDUCTION. WITH REGARD TO THE DONATION MADE TO CHI EF MINISTERS RELIEF FUND, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE ITSELF HAD ADDED IT BACK IN THE COMPUTATION OF INCOME AS AN IN ADMISSIBLE 4 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. DEDUCTION AND SOUGHT TO CLAIM THE SAME AS DEDUCTION U/S 80G OF THE ACT. IN FACT, AS WOULD BE EVIDENT FROM THE FINAL C OMPUTATION MADE BY THE ASSESSING OFFICER HE ALLOWED THE CLAIM OF TH E ASSESSEE IN THIS RESPECT. THEREFORE, THE ONLY DISPUTE REMAINED WITH REGARD TO THE EXPENDITURE CLAIMED TOWARDS PRIVILEGE FEE PAID TO T HE GOVERNMENT. OF A.P. THE DETAILS OF WHICH ARE AS UNDER:- I) PRIVILEGE FEE RS.1161. 66 CRORES II) SPECIAL PRIVILEGE FEES RS. 228.11 CRORES III) SPECIAL PRIVILEGE FEES FOR SPORT PROMOTION RS . 25.50 CRORES TOTAL RS.1415.28 CRORES. ---------------------- 5. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPL AIN UNDER WHAT PROVISION OF EXCISE LAW THESE PAYMENTS WERE MA DE AND HOW IT IS CLAIMED AS DEDUCTION IN COMPUTING INCOME. THE A SSESSEE IN ITS REPLY DATED 28-1-2010 STATED THAT THE BASIS OF CLAI M WAS AS PER SECTION 23A OF EXCISE ACT 1968. IT WAS STATED THA T NO DEMAND WAS RAISED UNDER EXCISE ACT FOR PRIVILEGE FEE OR SPECIA L PRIVILEGE FEE OR SPECIAL PRIVILEGE FEE FOR SPORTS. A DIRECTION WAS RECEIVED FROM THE GOVERNMENT VIDE GOMS NO.391 DATED 12-6-2001 TO PAY A SUM OF RS.25 CRORES AS SPECIAL PRIVILEGE FEE FOR SPORTS. THE CORPORATION ALSO RECEIVED DIRECTIONS OF THE GOVERNMENT. OF A./P . IN GO NO.242 DATED 31-3-2001 TO INCREASE THE RATE OF MARGINS BY 10% AND TO PAY SPECIAL PRIVILEGE FEE OF RS.250 CRORES. IT WAS SUB MITTED BY THE ASSESSEE THAT SALE PRICE IS INCLUSIVE OF EXCISE DUT Y AND SALES TAX. THE ASSESSEE FURTHER STATED THAT PRIVILEGE FEE, SPE CIAL PRIVILEGE FEE AND SPECIAL PRIVILEGE FEE FOR SPORTS AND CONTRIBUTI ON TO CHIEF 5 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. MINISTERS RELIEF FUND ARE NEITHER SEPARATELY INDIC ATED IN THE SALE BILLS NOR ANY SEPARATE HEADS ARE SHOWN IN THE SALE BILLS. THE ASSESSING OFFICER NOTICED THAT THOUGH THE ASSESSEE HAD CLAIMED THE AFORESAID THREE SUMS AS DEDUCTIONS BASED ON SECTION 23A OF THE EXCISE ACT BUT, FROM READING OF SECTION 23A OF EXCI SE ACT, IT BECOMES CLEAR THAT THE ASSESSEE OBTAINS THROUGH A C ONSOLIDATED SALE BILL A GROSS SUM. IT CAN RECEIVE THE ENTIRE MARGIN , SPECIAL PRIVILEGE FEE AND OTHER RECEIPTS OR ANY OTHER AMOUNTS FROM WH ATEVER SOURCES. THE SECOND PART OF SECTION STATES THAT IT SHOULD RE DUCE THE EXPENSES INCURRED THERE FROM. THE THIRD PART OF THE SECTION STATES THAT AFTER DEDUCTING EXPENSES, THE CORPORATION SHALL PAY AWAY THE PRIVILEGE FEE OR SPECIAL PRIVILEGE FEE OR ANY OTHER FEE BY WH ATEVER NAME CALLED TO THE COMMISSIONER OF PROHIBITION AND EXCISE IN TH E MONTH OR SUCCEEDING THE MONTH OF SALE. HE THEREFORE WAS OF THE VIEW THAT SECTION 23A INDICATES THAT PROFIT AND LOSS A/C IS T O BE DRAWN UP AND THE INCOME AND THE EXPENDITURE IS TO BE ASCERTAINED AND THE MARGIN IS ONLY TO BE PAID UNDER VARIOUS HEADS OR AS LUMPSU M TO THE GOVERNMENT OF A.P. HE THEREFORE CALLED UPON THE AS SESSEE TO EXPLAIN IF IT HAS FOLLOWED THE PROCEDURE AS LAID DO WN IN SECTION 23A OF THE EXCISE ACT. AS STATED BY THE ASSESSING OFFI CER IN THE ASSESSMENT ORDER, THE ASSESSEE IN ITS EXPLANATION S UBMITTED THAT IT HAS NOT FOLLOWED THE PROCEDURE BUT AN ALTERNATE ME THOD WAS ADOPTED AND SUBMITTED A WORK SHEET SHOWING COMPUTAT ION OF SALE PRICE AS UNDER:- SALE PRICE= MARGIN +SPECIAL MARGIN +VAT AS PER WHICH IT WOULD FOLLOW THAT THE ASSESSEE TOOK INTO CONSIDERATION THE TOTAL MARGIN AND DEDUCTED THERE F ROM SPECIAL PRIVILEGE FEE FOR SPORTS AND CMS RELIEF FUND AND THE BALANCE 6 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. AMOUNT WAS PAID AS PRIVILEGE FEE. THE ASSESSING OF FICER NOTED THAT ON CERTAIN BRANDS (FAST MOVING BRANDS ) 10% MARGIN IS OBTAINED. ON THESE BRANDS, TAKING INTO CONSIDERATION THE COST OF SALE PLUS THE MARGIN AND VAT 10% IS DERIVED AND PAID AS SPECIAL P RIVILEGE FEE. THUS, THE SPECIAL PRIVILEGE FEE IS WORKED AS A PERC ENTAGE OF TURNOVER ON SPECIAL BRAND. HE FURTHER NOTED THAT AS PER REC ORD, THERE IS NO DEMAND NOTICE OR WORKING OF PRIVILEGE FEE OR SPECIA L PRIVILEGE FEE OR SPORTS FEE UNDER THE EXCISE ACT. THE ENTIRE MARGIN IS TAKEN AND IT IS BIFURCATED AND PAID UNDER CERTAIN HEADS TO THE GOVE RNMENT OF A.P. IN THE AFORESAID FACTUAL BACKDROP THE ASSESSING OFF ICER WHILE CONSIDERING ADMISSIBILITY OF THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF PRIVILEGE FEE ETC., FOUND THE FOLLOWI NG ISSUES ARISING FOR CONSIDERATION. I) WHETHER INCOME HAS ACCRUED AND ARISEN TO ASSESSEE ON WHICH ASSESSEE IS LIABLE TO PAY TAX? II) WHETHER THE ASSESSEE IS CORRECT IN DEDUCTING THESE SUMS FIRST AND DECLARING LOSS AVOIDING INCOME-TAX, THROUGH INCOME HAS ACCRUED AND ARISEN DURING THE PREVIOUS YEAR? III) WHETHER THE DEDUCTION CLAIMED UNDER THE THREE HEADS I.E. PRIVILEGE FEE, SPECIAL PRIVILEGE FEE AND SPECIAL PRIVILEGE FEE SPORTS IS ADMISSIBLE U/S 23A OR NOT?. IV) WHETHER THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SEC. 23A OF THE EXCISE ACT IN ORDER TO CLAIM THE DEDUCTIONS? V) WHETHER THE ASSESSEE COMPANY HAS FOLLOWED THE PROVISIONS OF COMPANY LAW AND ACCOUNTING 7 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. STANDARDS IN ORDER TO CLAIM THESE SUMS AS DEDUCTIONS? VI) WHETHER THESE SUMS CAN BE SAID TO HAVE BEEN DIVERTED BY OVERRIDING TITLE? VII) WHETHER SECTION 23A OF EXCISE ACT AMOUNTS TO APPLICATION OF INCOME. VIII) DECISIONS ON ALLOWANCE OF THESE DEDUCTIONS. 6. THE ASSESSING OFFICER RELYING UPON A DECISION IN CASE OF WALLACE BROTHERS AND CO. LTD. V/S. CIT (16 ITR 240 ) AND KALWA DEVADATTAM V/S. UNION OF INDIA (49 ITR 165) (SC) NOTED THAT LIABILITY TO PAY INCOME-TAX ARISES ON THE ACCRUAL O F INCOME AND NOT FROM THE COMPUTATION MADE BY THE TAXING AUTHORITIES IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CONDUCTED BUSINESS ACTIVITIES THROUGHO UT THE YEAR AND INCOME HAD ACCRUED AND ARISEN TO IT WHENEVER SALES WERE CONDUCTED. ON SUCH INCOME WHICH ACCRUED TO THE ASSESSEE ALMOST ON DAILY BASIS IT SHOULD HAVE PAID ADVANCE-TAX AS WELL AS INCOME-T AX AS IT CANNOT BE DENIED THAT THE ASSESSEE IS ENGAGED IN TRADING A CTIVITY. THE ASSESSING OFFICER FURTHER OBSERVED THAT A READING O F SECTION 23A OF EXCISE ACT CLEARLY SHOWS THAT THE ASSESSEE CAN RECE IVE ANY SUMS AS ENTIRE MARGINS, SPECIAL PRIVILEGE FEE, ANY OTHER RE CEIPTS AND ANY OTHER AMOUNTS REALISED. THESE FOUR TYPES OF RECEIP TS CAN ARISE FOR THE ASSESSEE-CORPORATION. IT HAS TO DEDUCT INVARIAB LY THE EXPENSES. THE NET MARGIN/SUM AFTER DEDUCTING THE EXPENSES IS TO BE PAID AS PRIVILEGE FEE, SPECIAL PRIVILEGE FEE OR ANY TOGETHE R FEE BY WHATEVER NAME CALLED TO THE GOVERNMENT. IN THESE CIRCUMSTAN CES, THE QUESTION WHICH ARISES FOR CONSIDERATION IS, WHEN TH E ASSESSEE IS A 8 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. CORPORATION REGISTERED UNDER THE COMPANYS ACT WAS IT OBLIGATORY ON ITS PART TO FOLLOW PROVISIONS OF COMPANY LAW. THE ASSESSING OFFICER NOTED THAT ACCORDING TO SECTION 210, 210A ,211 AND SCHEDULE-6 ONLY TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS OF THE COMPANY ARE TO BE PUBLISHED. A PROFIT AND LOSS A/C SHOULD BE ENCL OSED DULY SHOWING CURRENT TAX LIABILITY AS WELL AS THE DEFERRED TAX L IABILITY. TAX HAS TO BE FIRST CLAIMED AS EXPENDITURE AND THE NET PROFIT IS TO BE DISCLOSED. THE ASSESSING OFFICER NOTED THAT EVEN ACCORDING TO THE ACCOUNTING STANDARD -22 CURRENT TAX LIABILITY IS TO BE TAKEN I NTO CONSIDERATION AS AN EXPENSE. HENCE THE ASSESSEE SHOULD HAVE FIRST DE DUCTED INCOME- TAX LIABILITY AS AN EXPENDITURE AND REMITTED THE RE SIDUARY SUM AS A MARGIN, PRIVILEGE FEE, SPECIAL PRIVILEGE FEE ETC. 7. IN THIS CONTEXT, THE ASSESSING OFFICER MADE A QUERY TO THE ASSESSEE AS TO WHY THIS PROCEDURE WAS NOT FOLLOWED. IT WAS STATED THAT ALTERNATIVE METHOD OF ASCERTAINING THE ENTIRE MARGIN WAS ADOPTED. IN FACT THE ENTIRE MARGIN WAS PAID TO THE GOVERNMENT. THE ASSESSEE FURTHER STATED THAT THE TAXAS EXPENSES WAS SHOWN BELOW THE LINE IN THE ANNUAL STATEMENT. THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAD NOT FOLLOWED THE PROCEDURE LAID DO WN IN SECTION 23A OF THE EXCISE WHICH ACCORDING TO ASSESSEE, IS T HE BASIS OF THEIR CLAIM. HAD THEY DRAWN UP THE P & L A/C BEFORE REM ITTING THE MARGIN, THEY WOULD HAVE DEDUCTED THE INCOME-TAX LIA BILITY ALSO. HOWEVER, THEY HAVE CONVENIENTLY ADOPTED AN ALTERNAT IVE METHOD OF TAKING THE GROSS MARGIN AS FIXED BY THE GOVERNMENT AND REMITTING THE SAME TO THE GOVERNMENT UNDER DIFFERENT HEADS AN D DECLARING LOSS OR NOMINAL INCOME TO THE INCOME-TAX DEPARTMENT THAT TOO ON ACCOUNT OF MINOR ADJUSTMENTS SUCH AS ADDING BACK OF DISALLOWABLE ON ACCOUNT OF PRIOR PERIOD ADJUSTMENTS. THE ASSESS ING OFFICER 9 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. THEREFORE WAS OF THE VIEW THAT THE DEDUCTION CLAIME D ON ACCOUNT OF PRIVILEGE FEE, SPECIAL PRIVILEGE FEE, SPECIAL PRIVI LEGE FEE SPORTS ETC.,. ARE NOT ADMISSIBLE SINCE THEY ARE NOT COMPUTED IN A CCORDANCE WITH SECTION 23A OF THE EXCISE ACT WHICH IS VERY BASIS O F THEIR CLAIM. EVEN, ACCORDING TO THE COMPANY LAW AND ACCOUNTING S TANDARDS, THE INCOME SHOULD HAVE BEEN FIRST ARRIVED AT AND THEN T HE INCOME-TAX LIABILITY OUGHT TO HAVE BEEN DEDUCTED AND LATER THE MARGIN SHOULD HAVE BEEN PAID AS PRIVILEGE FEE OR WHATEVER NAME CA LLED TO THE GOVERNMENT OF ANDHRA PRADESH. THEREFORE, EVEN UND ER THE COMPANY LAW THE ASSESSEE IS NOT ELIGIBLE TO CLAIM T HESE DEDUCTIONS PRIOR TO PAYMENT OF INCOME-TAX. SO FAR AS THE CON TENTION OF THE ASSESSEE THAT NO INCOME ACCRUED TO THE ASSESSEE AS IT WAS DIVERTED TO THE GOVERNMENT OF A.P BY OVER-RIDING TITLE THE A SSESSING OFFICER NOTED THAT THERE IS NO DOUBT THAT THE ASSESSEE RECE IVED THESE SUMS THROUGH SALE BILLS. THE SALE BILL INDICATES ONLY T HE GROSS SUMS AND HENCE THE ASSESSEE RECEIVED LUMPSUM SALE CONSIDERAT ION. 8. THE ASSESSING OFFICER RELYING UPON VARIOUS JUDI CIAL PRECEDENTS NOTED THAT WHERE AN ASSESSEE APPLIES AN INCOME TO DISCHARGE AN OBLIGATION AFTER THE INCOME REACHES ITS HANDS IT WO ULD BE AN APPLICATION OF INCOME AND THIS WOULD RESULT IN TAX ATION OF SUCH INCOME IN THE HANDS OF THE ASSESSEE. HOWEVER, THER E IS DIVERSION OF INCOME BEFORE IT REACHES THE HANDS OF THE ASSESSEE, IT WOULD BE AN OBLIGATION TO APPLY THE INCOME IN A PARTICULAR WAY BEFORE IT IS RECEIVED BY THE ASSESSEE OR BEFORE IT HAS ACCRUED O R ARISEN TO THE ASSESSEE RESULTS IN THE DIVERSION OF INCOME. APPL YING THE JUDICIAL PRECEDENTS REFERRED TO IN HIS ASSESSMENT ORDER THE ASSESSING OFFICER CONCLUDED THAT IN CASE OF THE ASSESSEE THERE IS NO DIVERSION OF INCOME BY OVER-RIDING TITLE. THE TRADING RECEIPTS OR GROSS RECEIPTS 10 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. THAT ARE RECEIVED BY THE ASSESSEE THE PURCHASERS DO NOT KNOW THE VARIOUS COMPONENTS OF SALE PRICE. THE GOVERNMENT I S ALSO NOT AWARE OF THE EXACT COMPONENT OF EACH SUM THAT IT IS GOING TO RECEIVE AND THE RATE AT WHICH IT IS PAID. THE ENTI RE MARGIN IS SOUGHT TO BE TAKEN AWAY IN THE NAME OF PRIVILEGE FEE TO MO BILISE ADDITIONAL RESOURCES, FURTHER SUMS UNDER THE HEAD SPECIAL PRIV ILEGE FEE AND SPORTS PRIVILEGE FEE ARE COLLECTED SUITABLY BY DIRE CTING THE CORPORATION TO ENHANCE THE MARGIN. IT IS NOT BY SP ECIFIC LEVY OF PRIVILEGE FEE OR SPORTS PRIVILEGE FEE IN THE SALE B ILL THAT IT IS COLLECTED. THEREFORE, IT IS NOT PASSED ON TO ANY F UND BY OVER-RIDING TITLE. THEREFORE, THE ENTIRE RESOURCE MOBILISATION DONE BY GOVERNMENT OF A.P THROUGH THE ASSESSEE CORPORATION BY RAISING THE MARGIN AND COLLECTING THE SAME CANNOT BE EXCLUDED F ROM THE TRADING RECEIPTS. THEREFORE, THERE CANNOT BE ANY DIVERSIO N OF INCOME BY OVER-RIDING TITLE. THE ASSESSING OFFICER OBSERVED THAT THE MANNER IN WHICH THE COMPUTATIONS ARE MADE BY THE COMPANY ALSO SHOWS THAT THE ENTIRE MARGIN WAS PASSED ON TO THE GOVERNMENT. WHEN THE ENTIRE MARGIN IS SOUGHT TO BE TAKEN AWAY BY THE GOV ERNMENT, IT MEANS IT WANTS TO TAKE THE ENTIRE PROFIT. 9. THUS, THE LEGISLATURE IN ITS WISDOM INTRODUCED SECTION 23A TO ENABLE THE CORPORATION TO PAY THE ENTIRE MARGIN TO THE GOVERNMENT OF A.P AFTER DEDUCTING THE EXPENSES INCLUDING TAXES . HOWEVER, THE ASSESSEE CORPORATION IGNORING THE LEGISLATIVE INTEN T OF SECTION 23A OF EXCISE ACT ADOPTED ITS OWN METHOD OF PAYING MARGIN THEREBY AVOIDING ITS RESPONSIBILITY TO PAY INCOME-TAX. THI S OBSERVATION MADE BY THE ASSESSING OFFICER WAS DUE TO THE FACT T HAT THE ASSESSEE FAILED TO ADOPT THE METHOD OF DEDUCTING EXPENSES AN D DRAWING UP PROFIT AND LOSS ACCOUNT AS PER COMPANY LAW OR OTHER WISE. THE 11 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. ASSESSING OFFICER OBSERVED THAT IF ASSESSEES CONTE NTION IS ACCEPTED THEN DIFFERENT MEANING TO SECTION 23A OF EXCISE ACT HAS TO BE GIVEN WHICH WOULD ALSO BE REPUGNANT TO THE STATE LAW AS W ELL AS COMPANY LAW AND INCOME-TAX LAW. HE FURTHER OBSERVED THAT T HE CONTENTION OF THE ASSESSEE THAT SINCE THE MONEY IS PAID BACK TO T HE STATE GOVERNMENT HENCE NO INCOME-TAX NEED BE PAID, IS ACC EPTED IT WOULD LEAD TO DRASTIC CONCLUSION. IN EFFECT IT WOULD MEA N THAT TOTAL MARGIN INCOME OF A SOLE DISTRIBUTOR OF IMFL FOR THE WHOLE STATE IS EXEMPT FROM INCOME-TAX THOUGH IT IS INVOLVED IN PROPER BUS INESS ACTIVITY. THE ASSESSING OFFICER REFERRING TO THE CONTENTS DOW NLOADED FROM THE WEBSITE OF THE ASSESSEE CORPORATION WHICH PROVIDED THE METHODOLOGY OF FIXATION OF PRICES AND MARGINS, SALE PRICE AND THE PURPOSE NOTED THAT THOUGH THE PROFIT WAS EARNED, BY GIVING IT THE NAME OF PRIVILEGE FEE THE SAME WAS SIPHONED OF EVAD ING PAYMENT OF INCOME-TAX. THE ASSESSING OFFICER HELD THAT THE IN FORMATION AVAILABLE ON THE WEBSITE WOULD MAKE IT CLEAR THAT V ARIOUS NAMES GIVEN TO MARGIN/PROFIT AS PRIVILEGE FEE, SPECIAL PR IVILEGE FEE ETC. IS NOTHING BUT PROFIT THAT IS GIVEN BACK TO THE GOVERN MENT OUT OF THE MONOPOLISTIC BUSINESS. 10 THE ASSESSING OFFICER OBSERVED THAT SINCE THE AS SESSEE ITSELF IN ITS WEBSITE HAS ADMITTED THAT THE PRIVILEGE FEE IS NOTHING BUT PROFIT PLOUGHED BACK THE DEDUCTION CLAIM CANNOT BE ALLOWED . THE ASSESSING OFFICER REFERRING TO THE MEMORANDUM AND A RTICLES OF ASSOCIATION OF THE ASSESSEE NOTED THAT IT DOES NOT CONTAIN ANY CLAUSE WITH RESPECT TO DECLARATION OF DIVIDEND, PAYMENT OF DIVIDEND ETC WHICH SHOWS A DELIBERATE ATTEMPT TO SIPHON OFF PROF ITS TO THE STATE GOVERNMENT. THIS IS IN TOTAL CONTRAST TO MEMORANDU M AND ARTICLES OF ASSOCIATION OF OTHER GOVERNMENT CORPORATIONS WHI CH CONTAIN 12 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. SPECIFIC CLAUSES WITH RESPECT TO DECLARATION OR PAY MENT OF DIVIDEND. THE ASSESSING OFFICER THEREAFTER ANALYSING THE NATU RE OF PRIVILEGE FEE, SPECIAL PRIVILEGE FEE AND SPECIAL PRIVILEGE FE E SPORTS ULTIMATELY CAME TO A CONCLUSION THAT THE DEDUCTION CLAIMED ON ACCOUNT OF PAYMENT OF PRIVILEGE FEE, SPECIAL PRIVILEGE FEE AND SPECIAL PRIVILEGE FEE SPORTS IS NOT ADMISSIBLE. IN THIS CONTEXT, THE ASSESSING OFFICER NOTED THAT IN COURSE OF PROCEEDINGS, WHEN THE AUDIT OR WHO CERTIFIED ANNUAL ACCOUNTS WAS CALLED UPON TO CLARIFY HOW THE ASSESSEE IS SAID TO HAVE COMPLIED WITH THE PROVISIONS OF COMPANY LAW AND ALSO WITH REGARD TO THE PROVISIONS OF SECTION 23A OF THE ACT, THE AUDITOR VIDE LETTER DATED 28-12-2010 CLAIMED THAT THE ENTIRE MAR GIN IS TO BE PAID AS PRIVILEGE FEE TO GOVERNMENT FOR THE RIGHT OBTAIN ED AS SOLE DEALER OF ALCOHOL AND BEVERAGES. THEY HAVE STATED THAT TH E PROVISION FOR TAX HAS BEEN DONE BELOW THE LINE. THE PROFIT HAS B EEN ARRIVED AFTER ALLOCATING EXPENSES AND INCOME AND NECESSARY PROVIS IONS FOR TAXATION HAS BEEN MADE WHICH HAS BEEN CERTIFIED BY CAG. 11. IT WAS CONTENDED BY THE AUDITOR THAT THE ASSE SSEE CORPORATION HAS TO BE TREATED AS AN EXTENDED ARM OF THE GOVERNMENT. HENCE IT IS BUT NATURAL FOR THE GOVERNM ENT TO EXERCISE TOTAL CONTROL OVER THE OPERATIONS OF THE CORPORATIO N. THE ASSESSEE BEING A GOVERNMENT COMPANY HAS TO OBEY THE DIRECTIO NS OF THE GOVERNMENT. THOUGH THE AUDITOR ALSO RAISED VARIOU S OTHER CONTENTIONS IN SUPPORT OF ITS CLAIM OF DEDUCTION OF THE AMOUNT PAID TO THE STATE GOVERNMENT BUT THE ASSESSING OFFICER R EJECTING THE SAME ULTIMATELY COMPLETED THE ASSESSMENT BY BRINGIN G TO TAX THE PRIVILEGE FEE ETC AMOUNTING TO RS.1415,28,24,605/-. THE ASSESSING OFFICER ALSO DISALLOWED AN AMOUNT OF RS.30,90,849/- REPRESENTING OUTSTANDING LIABILITY TOWARDS LEAVE SALARY PAYABLE AND PENSION 13 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. CONTRIBUTION PAYABLE U/S 43B OF THE ACT. BEING AGG RIEVED OF THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). THE CIT (A) HOWEVER CONFIRMED THE ASSESSMENT VIDE ORDER DATED 16-1-2012. AGAINST THE SAID ORDER OF THE FIR ST APPELLATE AUTHORITY, THE ASSESSEE PREFERRED FURTHER APPEAL BE FORE THE ITAT. 12 . IN COURSE OF HEARING BEFORE THE ITAT, AS APPEARS FROM FACTS ON RECORD, THE DEPARTMENTAL REPRESENTATIVE BR OUGHT TO THE NOTICE OF THE BENCH CERTAIN AMENDMENTS MADE TO THE EXCISE ACT WITH RETROSPECTIVE EFFECT. THE ITAT CONSIDERING SUCH FA CT OBSERVED THAT SINCE THE CIT (A) HAD NO OCCASION TO CONSIDER THE A MENDMENTS EFFECTED TO THE EXCISE ACT ON 16-4-2012 DIRECTED TH E CIT (A) TO DECIDE THE ISSUE DE NOVO AFTER EXAMINING THE SAID A MENDMENT. 13. THE CIT (A), IN PURSUANCE TO THE DIRECTION OF THE INCOME-TAX APPELLATE TRIBUNAL TOOK UP THE PROCEEDINGS AGAIN. IN COURSE OF HEARING, THE ASSESSEE ALSO FILED WRITTEN SUBMISSION S BEFORE THE CIT (A). THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND TAKING NOTE OF THE PROVISIONS CONTAINED IN THE NEWLY INSERTED SECTIONS 4A, 4B AND 4C OF THE EXCISE ACT AND THE RE PEALED SECTIONS 23A AND 23B OBSERVED THAT SECTION 4C ONLY STATES T HAT THE AMOUNT PAID IS INCOME OF GOVERNMENT I.E. IN THE HANDS OF T HE RECIPIENT. THE CIT (A) HOWEVER WAS OF THE VIEW THAT FOR THE PURPOS E OF TAXATION, THE NATURE OF PAYMENT IN THE HANDS OF THE RECIPIENT IS NOT MATERIAL BUT THE NATURE IN THE HANDS OF THE PAYER I.E. THE A SSESSEE IS IMPORTANT. THE CIT (A) FURTHER OBSERVED THAT THE M ANNER OF COMPUTATION OF SUCH PAYMENT CLEARLY ESTABLISHED THE FACT THAT THE INCOME OF THE ASSESSEE CORPORATION IS PASSED ON TO THE STATE GOVERNMENT. HENCE, IT IS OBLIGATORY ON THE PART OF THE ASSESSEE TO PAY INCOME-TAX ON THE INCOME BEFORE THE APPROPRIATI ON OF PROFITS 14 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. AND THEN REMIT THE BALANCE AMOUNT. THE CIT (A) NOT ED THAT THERE IS NO NOTIFICATION OR STATUTORY PROVISIONS EXPRESSLY TREATING THE INCOME OF THE CORPORATION AS THAT OF THE STATE. SE CTION 4C ONLY STATES THAT CERTAIN PAYMENTS MADE BY THE CORPORATIO N ARE DEEMED AS INCOME OF THE STATE AND THIS DOES NOT EXTEND TO THE ENTIRE INCOME OF THE ASSESSEE AS THE PAYMENTS COVER ONLY PART OF THE INCOME AND THE BALANCE AMOUNT OF PROFIT IS REMITTED AS DONATIO N ON WHICH DEDUCTION U/S 80G IS CLAIMED. THE CIT (A) RELYING UPON THE DECISION OF THE HONBLE AP HIGH COURT IN CASE OF APSCSC LTD (149 ITR 497) NOTED THAT THE HONBLE AP HIGH COURT LAID DOWN 5 TE STS FOR A CORPORATION TO BE TERMED AS INSTRUMENTALITY OF STAT E. EVEN THOUGH THE HONBLE HIGH COURT FOUND THE CORPORATION WAS ME ETING ALL THE TESTS, STILL THEN THE HIGH COURT HELD THAT AN INSTR UMENTALITY IS DIFFERENT FROM STATE AND ITS INCOME CANNOT BE EQUAT ED TO THAT OF A STATE. THE CIT (A) FURTHER OBSERVED THAT IF SECTI ON 4C IS INTERPRETED IN A MANNER TO MEAN THAT INCOME OF THE CORPORATION IS THAT OF THE STATE THEN IT WOULD IMPLY THAT LEGISLAT ION IS PASSED BY THE STATE ON A SUBJECT ON WHICH CENTRE IS ONLY COMP ETENT TO LEGISLATE. IN SUCH EVENT, THE STATE LAW IS BOUND TO FAIL AS THERE IS REPUGNANCY WITH CENTRAL LAW. IN THIS CONTEXT THE C IT (A) RELIED UPON A DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF UP JAL NIGAM LTD. (202 TAXMAN 285). THE CIT (A) ON INT ERPRETING SECTION 4C WAS OF THE VIEW THAT IT ONLY RE-AFFIRMS THE FACT THAT IT IS THE PROFIT THAT IS SOUGHT TO BE APPROPRIATED. IT I S NEVER THE CASE OF THE DEPARTMENT THAT THE GOVERNMENT OF AP HAS NO RIG HT TO RECEIVE INCOME FROM THE ASSESSEE. THE NEW AMENDMENT TO THE EXCISE ACT CLEARLY ESTABLISHES THE FACT THAT THE ENTIRE INCOME OF THE ASSESSEE IS NOT THAT OF STATE AND ONLY THE AMOUNTS SPECIFIED AS PRIVILEGE FEE IS INCOME OF THE STATE. THE CIT (A) OBSERVED THAT A S SECTION 4A DOES 15 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. NOT PRESCRIBE METHOD OF COMPUTING PRIVILEGE FEE, TH E COMPUTATION STILL NEEDS TO BE MADE U/S 23A. 14. THE CIT (A) WAS OF THE VIEW, SINCE INCOME TAX I S AN EXPENSE IN COMMERCIAL SENSE AS PER AS-22, THE ASSESSEES CONTE NTION THAT THE ENTIRE MARGIN AFTER EXCLUDING THE EXPENSES IS THE INCOME OF THE STATE CANNOT BE ACCEPTED. THE CIT (A) RELYING UP ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF D. CAWASJI AND CO. (150 ITR 648) HELD THAT THE AMENDMENT HAVING BEEN MADE TO RA TIFY THE PAYMENT ONLY WITH A VIEW TO AVOID INCOME-TAX, SUCH AMENDMENT IS ILLEGAL AND CANNOT BE APPLIED RETROSPECTIVELY. THE CIT (A) FURTHER HELD THAT EVEN THE AMENDMENT DO NOT IN ANY WAY COME TO THE RESCUE OF THE ASSESSEE IN VIEW OF THE RATIO LAID DO WN BY THE HONBLE SUPREME COURT ON ARTICLE 289 OF THE CONSTITUTION IN THE CONTEXT OF TAX LIABILITY OF A CORPORATION VIS-A VIS THE STATE GOVERNMENT. WITH THE AFORESAID OBSERVATION, THE CIT (A) DISMISSED T HE APPEAL OF THE ASSESSEE. 15. THE LD. AR APART FROM MAKING SUBMISSIONS AT THE TIME OF HEARING ALSO FILED WRITTEN SUBMISSIONS CONTENDING AS UNDER:- 2. THE FIRST GROUND IS WITH REGARD TO VALIDITY OF AMENDMENTS MADE TO THE STATE ACT. THE LEARNED CIT(A) WHILE DEALING WITH THE AMEN DMENTS MADE TO THE STATE ACT HAS HELD THAT IT IS REPUGNANT TO THE CENTRAL AC T AND HELD IT TO BE INVALID. THE LEARNED CIT(A) RELIED ON THE DECISION OF SUPREME CO URT IN THE CASE OF UP JAL NIGAM LTD., REPORTED IN 202 TAXMAN 285. IT IS RESPE CTFULLY SUBMITTED THAT THEIR LORDSHIPS OF ALLAHABAD HIGH COURT WHILE DEALING WIT H TAXABILITY OF INCOME OF A LOCAL AUTHORITY, AFTER AMENDMENT TO SEC.10(20) OF T HE ACT, REFERRED TO ARTICLE 246 OF THE CONSTITUTION OF INDIA READ WITH E'NTRY 82 OF LIST 1 OF SCHEDULE VII OF THE CONSTITUTION OF INDIA AND HELD THAT THE STATE CANNO T EXERCISE ITS POWER ON AN ITEM MEANT FOR THE CENTRAL GOVERNMENT. THEIR LORDSHIP WE NT ON TO OBSERVE THAT THE LOCAL AUTHORITY SHOULD BE DEFINED KEEPING IN VIEW T HE PROVISIONS,CONTAINED IN PART IX AND IXA OF THE CONSTITUTION AND SECTION 10( 20) OF THE I.T.ACT. ACCORDINGLY IT HELD THAT IN VIEW OF ARTICLE 254 OF THE CONSTITU TION TO THE EXTENT OF REPUGNANCY THE CENTRAL ACT SHALL PREVAIL. 16 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 3. THE APPELLANT RESPECTFULLY SUBMITS THAT THE LEAR NED CIT(A) FELL IN ERROR ON RELYING ON THIS DECISION TO HOLD THAT THE AMENDMENT S TO THE STATE ACT IS REPUGNANT TO CENTRAL ACT EVEN WITHOUT STATING AS TO WHICH POW ER OF THE CENTRE THE STATE HAS TAKEN OVER WHILE MAKING AMENDMENTS TO THE STATE ACT , BY REFERRING SPECIFICALLY TO SUCH PART OF THE PROVISION IN THE AMENDED ACT. IT I S SUBMITTED THAT THE AMENDMENTS ARE CARRIED OUT TO THE ANDHRA PRADESH EX CISE AND ANDHRA PRADESH (REGULATION OF TRADE IN INDIAN MADE FOREIGN LIQUOR, FOREIGN LIQUOR) ACTS, (AMENDMENT) ACT, 2012(ANDHRA PRADESH ACT NO. 5 OF 2 012). SUCH ACT IS MADE UNDER POWERS CONFERRED, IN SCHEDULE VII, ENTRY 8 OF LIST II OF THE CONSTITUTION OF INDIA. THIS PROVISION DEALS WITH INTOXICATING LIQUO RS. THIS IS EXCLUSIVELY IN THE STATE DOMAIN AND AS PER THE FRAME WORK OF THE CONST ITUTION OF INDIA CENTRE HAS NO POWER WHAT SO EVER ON THIS. 4. THE APPELLANT SUBMITS THAT IT HAS EXCLUSIVE RIGH TS NOT JUST IN MAKING LAWS IN RESPECT OF INTOXICANT BUT ALSO WITH REGARD TO IMPOS T ON SALE OF INTOXICANTS. TO SUBSTANTIATE THIS SUBMISSION, THE APPELLANT INVITES KIND ATTENTION OF THE HON'BLE TRIBUNAL TO THE DECISION OF SUPREME COURT IN THE CA SE OF STATE OF UP VS. SHEOPAT RAI, AIR 1994 SC 813 (PARAS 16, 32 AND 41) WHEREIN THEIR LORDSHIPS UPHELD THE ORDINANCE PASSED BY STATE BESIDES CATEGORICALLY HOL DING THAT SUCH CHARGE IN FACT IS NOT A 'FEE' FALLING UNDER ENTRY 66 OF LIST II WH ICH DEALS WITH 'EXCISE DUTY' BUT IT IS A CONSIDERATION RECEIVED BY THE GOVERNMENT FOR PART ING WITH ITS EXCLUSIVE PRIVILEGE TO DEAL IN INTOXICANTS THEREBY FALLING UN DER ENTRY 8 OF LIST II OF SCHEDULE VII TO CONSTITUTION OF INDIA. 5. THE APPELLANT FURTHER INVITES KIND ATTENTION OF THE HON'BLE TRIBUNAL TO THE RECENT DECISION OF SUPREME COURT IN THE CASE OF STATE OF K ERALA AND OTHERS VS. KANDATH DISTILLERIES [CIVIL APPEAL NO. 1642 OF 2013 ARISING OUT OF SLP (CIVIL) NO. 9098 OF 2009] A COPY OF WHICH IS PLACED IN PAPER BOOK AT PA GES 155 TO 167. THE RELEVANT PORTION IS EXTRACTED HERE UNDER: '20. WE MAY, BEFORE EXAMINING THE SCOPE OF THE ABOV E MENTIPNED PROVISIONS AND THE NATURE OF JURISDICTION OR THE POWERS T6 BE EXER CISED BY THE COMMISSIONER AND THE STATE GOVERNMENT, EXAMINE THE GENERAL PURPORT O F THE ACT IN THE LIGHT OF ARTICLE 19(1)(G) OF THE CONSTITUTION OF INDIA. RIGHT TO CARRY ON TRADE OR BUSINESS IN LIQUOR 21. ARTICLE 47 IS ONE OF THE DIRECTIVE PRINCIPLES O F STATE POLICY WHICH IS FUNDAMENTAL IN THE GOVERNANCE OF THE COUNTRY AND TH E STATE HAS THE POWER TO COMPLETELY PROHIBIT THE MANUFACTURE, SALE, POSSESSI ON, DISTRIBUTION AND CONSUMPTION OF LIQUOR AS A BEVERAGE BECAUSE IT IS I NHERENTLY DANGEROUS TO THE HUMAN HEALTH. CONSEQUENTLY, IT IS THE PRIVILEGE OF THE STATE AND IT IS FOR THE STATE TO DECIDE WHETHER IT SHOULD PART WITH THAT PRIVILEG E, WHICH DEPENDS UPON THE LIQUOR POLICY OF THE STATE. STATE HAS, THEREFORE, T HE EXCLUSIVE RIGHT OR PRIVILEGE IN 17 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. RESPECT OF PORTABLE LIQUOR. A CITIZEN HAS, THEREFORE, NO FUNDAMENTAL RIGHT TO T RADE OR BUSINESS IN LIQUOR AS A BEVERAGE AND THE ACTIVITIES, WHICH ARE RES EXTRA CO MMERCIUM, CANNOT BE CARRIED ON BY ANY CITIZEN AND THE STATE CAN PROHIBIT COMPLE TELY TRADE OR BUSINESS IN PORTABLE LIQUOR AND THE STATE CAN ALSO CREATE A MON OPOLY IN ITSELF FOR THE TRADE OR BUSINESS IN SUCH LIQUOR. THIS LEGAL POSITION IS WEL L SETTLED. STATE CAN ALSO IMPOSE RESTRICTIONS AND LIMITATIONS ON THE TRADE OR BUSINE SS IN LIQUOR AS A BEVERAGE, WHICH RESTRICTIONS ARE IN NATURE DIFFERENT FROM THO SE IMPOSED ON TRADE OR BUSINESS IN LEGITIMATE ACTIVITIES AND GOODS AND ARTICLES WHI CH ARE RES COMMERCIUM. REFERENCE MAY BE MADE TO THE JUDGMENTS OF THIS COUR T IN VITHAL DATTATRAYA KULKARNI AND OTHERS V. SHAMRAO TUKARAM POWER SMT AN D OTHERS (1979) 3 SCC 212, P. N. KAUSHAL & OTHERS V. UNION OF INDIA & OTH ERS (1978) 3 SCC 558, KRISHNA KUMAR NARULAETC. V. STATE OF JAMMU & KASHMI R & OTHERS AIR 1967 SC 1368, NASHIRWAR AND OTHERS V. STATE OF MADHYA PRADE SH & OTHERS (1975) 1 SCC 29, STATE OF A. P. & OTHERS V. MCDOWELL & CO AND OT HERS (1996) 3 SCC 709 AND KHODAY DISTILLERIES LTD. & OTHERS V. STATE OF KARNA TAKA & OTHERS (1995) 1 SCC 574. 22. LEGISLATURE, IN ITS WISDOM, HAS GIVEN CONSIDERA BLE AMOUNT OF FREEDOM TO THE DECISION MAKERS, THE COMMISSIONER AND THE STATE GOV ERNMENT SINCE THEY ARE CONFERRED WITH THE POWER TO DEAL WITH AN ARTICLE WHICH IS INH ERENTLY INJURIOUS TO HUMAN HEALTH. 23. SECTION 14 OF THE ACT INDICATES THAT THE COMMIS SIONER CAN EXERCISE HIS POWERS TO GRANT LICENCE ONLY WITH THE APPROVAL OF THE STATE G OVERNMENT BECAUSE THE STATE HAS THE EXCLUSIVE PRIVILEGE IN DEALING WITH LIQUOR. THE POW ERS CONFERRED ON THE COMMISSIONER AND THE STATE GOVERNMENT UNDER SECTION14 AS WELL AS RULE, 4 ARE DISCRETIONARY IN NATURE, WHICH IS DISCERNIBLE FROM THE PERMISSIBLE L ANGUAGE USED THEREIN. 24. LIQUOR POLICY OF STATE IS SYNONYMOUS OR ALWAYS CLOSELY ASSOCIATED WITH THE POLICY OF THE STATUTE DEALING WITH LIQUOR OR SUCH OBNOXIOUS S UBJECTS. MONOPOLY IN THE TRADE OF LIQUOR IS WITH THE STATE AND IT IS ONLY A PRIVILEGE THAT A LICENSEE HAS IN THE MATTER OF MANUFACTURING AND VENDING IN LIQUOR, SO HELD, BY TH IS COURT IN STATE OF MAHARASHTRA V. NAGPUR DISTILLERIES (2006) 5 SCC 112. COURTS ARE AL SO NOT EXPECTED TO EXPRESS THEIR OPINION AS TO WHETHER AT A PARTICULAR POINT OF TIME OR IN A PARTICULAR SITUATION, ANY SUCH POLICY SHOULD HAVE BEEN ADOPTED OR NOT. 1998 POLICY HAS LIFE ONLY IN THAT YEAR AND IF ANY RIGHTS HAVE ACCRUED TO ANY PARTY, THAT HAVE TO BE A DJUDICATED THEN AND THERE.' 6. THE APPELLANT WOULD ALSO INVITE KIND ATTENTION O F THE HON'BLE TRIBUNAL TO THE DECISION OF SUPREME COURT IN THE CASE OF APSRTC REPORTED IN 52 ITR 524 RELEVANT PORTION OF WHICH IS REPRODUCED HERE UNDER: '15. IT MAY BE THAT THE STATUTE UNDER WHICH A NOTIF ICATION HAS BEEN ISSUED CONSTITUTING THE APPELLANT CORPORATION MAY PROVIDE EXPRESSLY OR BY NECESSARY IMPLICATION THAT THE INCOME DERIVED BY THE CORPORATION FROM ITS TRADING ACTIVITY WOULD BE THE INCOME OF THE 18 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. STATE. THE DOCTRINE OF THE SEPARATE ENTITY OR PERSO NALITY OF THE CORPORATION IS ALWAYS SUBJECT TO THE EXCEPTIONS WHICH STATUTES MAY CREATE , AND IF THERE IS A STATUTORY PROVISION WHICH CLEARLY INDICATES THAT DESPITE THE CONCEPT OF THE SEPARATE PERSONALITY OF THE CORPORATION, THE CARRIED ON BY IT BELONGS TO THE SH AREHOLDERS WHO BROUGHT THE CORPORATION INTO EXISTENCE AND THE INCOME RECEIVED FROM THE SAID TRADE LIKEWISE BELONGS TO THEM, THAT WOULD BE ANOTHER MATTER. IT WOULD THE N BE POSSIBLE TO HOLD THAT AS A RESULT OF THE SPECIFIC STATUTORY PROVISIONS THE INCOME REC EIVED FROM THE TRADE CARRIED ON BY THE CORPORATION BELONGS TO THE SHAREHOLDERS WHO HAVE CO NSTITUTED THE SAID CORPORATION, AND SO, WE MUST LOOK TO THE ACT TO DETERMINE WHETHER TH E INCOME IN THE PRESENT CASE CAN BE SAID TO BE THE INCOME OF THE STATE OF ANDHRA PRADES H'. 7. THE APEX COURT IN THE ABOVE OBSERVATIONS OF THE SAID DECISION HAS IMPLIEDLY HELD THAT THE STATE COULD EXPRESSLY OR BY IMPLICATION HOLD TH E INCOME FROM A CORPORATION TO BE THAT OF THE STATE. THE APPELLANT FURTHER SUBMITS TH AT THE STATE WHILE CARRYING OUT THE AMENDMENTS TO THE EXCISE ACT ETC., IN NO WAY HAS TR ANSGRESSED INTO THE SUBJECTS THAT ARE MEANT FOR CENTRE IN ENTRY 82 OF LIST 1 OF SCHED ULE VII TO CONSTITUTION OF INDIA, BUT CONFINED ONLY TO THE POWERS THAT ARE GRANTED TO IT BY THE CONSTITUTION OF INDIA TO DEAL WITH INTOXICANTS. THE APPELLANT THEREFORE SUBMITS THAT T HE CONCLUSION OF THE LEARNED CIT(A) THAT THE AMENDMENTS MADE BY STATE TO EXCISE ACT ETC ., ARE REPUGNANT TO CENTRAL ACT IS WITHOUT BASIS AND WITHOUT APPRECIATING THE CONSTITU TIONAL PROVISIONS UNDER WHICH THE STATE HAS CARRIED OUT THE AMENDMENTS. 8. IN CASE THE LEARNED CIT(A) HAD IN HER MIND ABOUT THE AMENDMENT TO HOLD THE INCOME TO BE THAT OF THE STATE, THE APPELLANT SUBMITS THAT THE PROVISION HOLDING THE INCOME TO BE THAT OF THE STATE IS NOT UNDERSTOOD IN ITS RIGHT PE RSPECTIVE. KIND ATTENTION OF THE HON'BLE TRIBUNAL IS INVITED TO THE PROVISIONS OF AMENDED AC T WHICH IS REPRODUCED HERE UNDER; 1. LEVY OF TRADE MARGIN PRIVILEGE FEE ETC: SEC.4-A: THE GOVERNMENT SHALL FROM TIME TO TIME SPECIFY THE TRADE MARGIN, PRIVILEGE FEE OR ANY OTHER LEVY BY WHATEVER NAME CALLED, TO BE COLLECTED BY THE AP BEVERAGES CORPORA TION LTD, FROM THE HOLDERS OF LICENCES. 2. REMITTANCE TO THE GOVERNMENT : SEC.4-B: THE AMOUNT REALIZED UNDER SECTION 4-A BEING THE INCOME OF THE GOVERNMENT, SHALL BE REMITT ED BY THE A.P.BEVERAGES CORPORATION LTD., TO THE GOVERNMENT IN THE MANNER S PECIFIED BY THE GOVERNMENT. 3. PRIVILEGE FEE ETC., U/S.23(L), 23-A AND 23-B OF THE AP.EXCISE ACT TO BE THE INCOME OF THE GOVERNMENT: SEC.4-C NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, THE AP EXCISE ACT, 1968 AND THE RULES MADE THERE UNDER OR ANY ORDER ISSUED BY THE GOVERNMENT OR THE COMMISSIONER OF PROHIBITION AND E XCISE, ALL AMOUNTS PAID BY THE CORPORATION FROM 211993 TO THE COMMISSIONER OF PROH IBITION AND EXCISE OR THE GOVERNMENT AS PRIVILEGE FEE OR SPECIAL PRIVILEGE FE E OR ANY OTHER FEE OR CESS, BY WHATEVER NAME CALLED, IN CONSIDERATION OF THE PRIVI LEGE CONFERRED ON THE CORPORATION, AS PER THE PROVISIONS OF SECTIONS 23(1), 23-A AND 23-B OF THE A.P.EXCISE ACT, 1968 SHALL BE DEEMED TO BE AND ALWAYS DEEMED TO HAVE BEEN THE INC OME OF THE GOVERNMENT AND DUE 19 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. PAYMENT FOR THE RELEVANT YEARS IN TERMS OF SECTION 4-B. 4. IN THE AP EXCISE ACT, 1968, SECTION 23-A AND SEC TION 23-B SHALL BE OMITTED. 9. THE HON'BLE TRIBUNAL WILL APPRECIATE THAT IN THE FIRST PROVISION SECAA IT IS STATED THAT THE GOVERNMENT SHALL FROM TIME TO TIME FIX THE MARG INS. IN THE SECOND PROVISION 48 IT IS STATED THAT THE 'AMOUNTS REALIZED UNDER THE PROVISI ONS OF SECAA BEING THE INCOME OF THE STATE'. THE APPELLANT THEREFORE SUBMITS THAT WHAT T HE PROVISION STATES IS THAT THE IMPOST MADE UNDER THE PROVISIONS OF SECAA ARE THE INCOME O F THE STATE, AND BY NO STRETCH OF IMAGINATION IT COULD BE HELD THAT THE STATE HAS TRA NSGRESSED INTO LEGISLATING SUBJECTS THAT ARE CONTAINED IN LIST I OF SCHEDULE VII TO CONSTITU TION OF INDIA. AS SUBMITTED EARLIER, HON'BLE SUPREME COURT IN THE CASE OF STATE OF UP VS . SHEOPAT RAI HELD THAT THE IMPOST BEING A CONSIDERATION FOR PARTING WITH THE RIGHT TO VEND INTOXICANTS FALLS UNDER ENTRY 8 OF LIST II OF SCHEDULE VII OF CONSTITUTION OF INDIA TH AT IS IN EXCLUSIVE DOMAIN. NOT JUST IN THIS CASE, BUT THE SUPREME COURT HAS CONSISTENTLY TAKEN THIS VIEW AND THOSE JUDGEMENTS ARE REFERRED TO IN THE DECISION OF MCDOWELS OF SUPREME COURT, EXTRACT OF WHICH IS REPRODUCED IN A LATER PART OF THESE SUBMISSIONS. THE APPELLANT THEREFORE SUBMITS THAT THE FINDING OF THE LEARNED C!T(A) THAT THE PROVISIONS ARE REPUGNAN T IS ERRONEOUS AND IS WITHOUT BASIS AND CONTRARY TO FACTS, JUDGEMENTS OF HON'BLE APEX C OURT AND PROVISIONS OF CONSTITUTION OF INDIA. 10. THE LEARNED CIT(A) WHILE HOLDING THE AMENDMENTS TO ACT TO BE REPUGNANT, FELL IN ERROR IN HOLDING THAT RETROSPECTIVE AMENDMENT ALSO IS INCORRECT BY MISPLACED RELIANCE ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF D.CAW ASJI & CO REPORTED IN 150 ITR 648. HERE AGAIN, THE APPELLANT SUBMITS THAT, THE LE ARNED CIT(A) HAS NOT APPRECIATED THE FACTS ON WHICH THE SAID JUDGEMENT WAS RENDERED, AND BY OVERLOOKING OTHER JUDGEMENTS OF APEX COURT WHICH HELD THAT THE STATE HAS ALL THE POWER TO ENACT LAW RETROSPECTIVELY. 11. IN SO FAR AS THE JUDGEMENT OF HON'BLE SUPREME C OURT IN THE CASE OF CAWSJI, UPON WHICH MUCH RELIANCE WAS PLACED BY THE LEARNED CIT(A ) THE FACTS INVOLVED WERE TOTALLY DIFFERENT AND THE HON'BLE COURT WAS DEALING WITH DI FFERENT SUBJECT. IN THE SAID CASE, AMENDMENT THAT WAS CARRIED OUT BY THE STATE TO RATI FY THE COLLECTIONS OF SALES TAX WAS TO NULLIFY A JUDGEMENT OF HIGH COURT WHICH HAS HELD SUCH LEVY TO BE INVALID. EVEN IN THE JUDGEMENT OF HMT THAT IS REFERRED TO BY THE APPELLA NT THE APEX COURT EXPRESSED THE VIEW THAT ONCE AN ISSUE IS CONSIDERED BY HIGH COURT THE SAME CANNOT BE MADE GOOD BY AMENDMENT. KIND ATTENTION IS INVITED TO STATE OF A. P. VS. HMT (COPY OF WHICH IS PLACED IN PAPER BOOK AT PAGES 168-175). WHEREAS IN THE APP ELLANT'S CASE, THOSE FACTS DOES NOT EXIST AND IT IS IMPROPER AND INCORRECT ON PART OF L EARNED CIT(A) TO HOLD THE AMENDMENTS MADE BY THE STATE TO BE INVALID. FORTHE FIRST TIME THE AMENDMENT IS CARRIED OUT. THE LEARNED CIT(A) HAS NOT EVER\ TRIED TO FIND OUT THE REASONS FOR SUCH RETROSPECTIVE AMENDMENT BEFORE HOLDING IT TO BE INVALID. 12. THE APPELLANT SUBMITS THAT AS PER GO MS.NO.614 DT.6-5-2005, (COPY PLACED IN PAPER BOOK AT PAGE NO.223) THE STATE HAS DIRECTED T HE DIRECTOR OF DISTILLERIES TO DIRECT THE DEPOT MANAGERS OF APBCL TO OBTAIN DEMAND DRAFTS IN FAVOUR OF GOVERNMENT OF 20 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. A.P.DIRECTOR OF DISTILLERIES AND BREWERIES FOR THE SALE PROCEEDS OF LIQUOR AND DEPOSIT WITH CONCERNED TREASURY UNDER SPECIFIED ACCOUNT. SUBSEQU ENTLY, THE PROVISION IN EXCISE ACT 1968 ALSO IS AMENDED BY INSERTING SEC.23-A TO STATE THAT IN LIEU OF CONFERRING THE PRIVILEGE FOR WHOLESALE TRADE, ENTIRE MARGIN SHOULD BE REMITTED TO THE STATE. THE REMITTANCES TO THE STATE CONTINUED WITH THAT PROVIS ION IN ACCORDANCE WITH THE ABOVE REFERRED GO. ALSO AS PER THIS GO, ONLY THE DIRECTOR OF DISTILLERIES USED TO MAKE PAYMENTS TO APBCL FOR PURCHASES AT REGULAR INTERVAL S FINROM THE PO ACCOUNT AND ALSO ALLOWING APBCL TO OPERATE A 00 ACCOUNT WITH SBH TO THE TUNE OF RS.L00 CRORES IN A MONTH TO MEET THE SALARIES AND OTHER MAINTENANCE EX PENDITURE. THIS GO IS IN ACCORDANCE WITH ARTICLE 284 AND 283 OF CONSTITUTION . 13. THE STATE HAVING FOUND THAT SINCE 2005 THE PAYM ENTS ARE BEING MADE TO THE STATE HAS DECIDED TO SHIFT THE PROVISION FROM EXCIISE ACT 68 TO THE 1993 ACT THAT CONFERRED THE RIGHT TO CARRYON WHOLESALE TRADE IN LIQUOR. THEREFO RE, THE APPELLANT SUBMITS THAT THERE IS NEITHER REPUGNANCY NOR ILLEGALITY IN MAKING A RETRO SPECTIVE AMENDMENT. THIS POWER IS IN ACCORDANCE WITH ENTRY 8 LIST II OF CONSTITUTION. TH E APPELLANT THEREFORE SUBMITS THAT THE FINDING OF THE LEARNED CIT(A) TO THIS EFFECT IS INC ORRECT AND CONTRARY TO JUDICIAL PRONOUNCEMENTS AND CONSTITUTIONAL PROVISIONS. 14. THE NEXT GROUND RELATE TO POWER OF THE LEARNED CIT(A) TO HOLD THAT THE STATE HAS NO POWER TO MAKE RETROSPECTIVE LAW. THE APPELLANT SUBM ITS THAT THE LEARNED CIT BEING AN OFFICIAL OF THE GOVERNMENT HAS NO POWER TO HOLD A P ROVISION ENACTED BY A STATE GOVERNMENT TO BE INCORRECT OR INVALID. ONLY A HIGH COURT OR SUPREME COURT ARE CONFERRED WITH POWERS UNDER ARTICLE 226 OR ARTICLE 32 OF CONSTITUTION OF INDIA TO GO INTO THE VALIDITY OR OTHERWISE OF A PROVISION OF STATUTE . IF THE REVENUE HAS ANY RESERVATIONS, IT OUGHT TO HAVE FILED A WRIT BEFORE THE HIGH COURT QU ESTIONING SUCH AMENDMENT. 15. THE NEXT GROUND RELATE TO THE OBSERVATIONS OF T HE LEARNED CIT(A) TH,AT THE INCOME BELONG TO THE APPELLANT. THE LEARNED CIT(A) AFTER H OLDING THAT THE AMENDMENTS ARE REPUGNANT AND ARE INVALID BEING RETROSPECTIVE WENT ON TO REITERATE THAT THE INCOME FROM WHOLESALE TRADE IN LIQUOR BELONG TO THE APPELLANT. IN THIS REGARD THE APPELLANT SUBMITS THAT THE LEARNED CIT(A) HAS NOT CONSIDERED ANY OF T HE FACTS OR PROVISIONS OF LAW BEFORE COMING TO SUCH CONCLUSION. THE ATTENTION OF THE LEA RNED CIT(A) WAS DRAWN TO THE RELEVANT PROVISION BY WHICH THE APPELLANT WAS CONFE RRED THE RIGHT TO DO WHOLE SALE TRADE. IT WAS SUBMITTED THAT ONLY BY VIRTUE OF HOLDING THE APPELLANT TO BE AN AUTHORITY ACTING ON BEHALF OF THE STATE FOR THE PURPOSES OF SEC.68-A OF EXCISE ACT THE APPELLANT CARRIED ON THE TRADE. THE RELEVANT PROVISIONS OF THE LAW ARE R EPRODUCED HERE UNDER: 'EXPLANATION TO PROVISIONS OF SEC.4 OF AP (REGULAT ION OF TRADE IN INDIAN LIQUOR, FOREIGN LIQUOR) ACT, 1993: 'EXPLANATION:- FOR THE REMOVAL OF DOUBTS IT IS HERE BY DECLARED THAT THE ANDHRA PRADESH BEVERAGES CORPORATION LIMITED SHALL, WHILE CARRYING ON THE HOLESALE TRADE AND DISTRIBUTION OF [INDIAN MADE FOREIGN LIQU OR], FOREIGN LIQUOR, WINE AND 21 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. BEER UNDER THIS SECTION SHALL BE DEEMED TO BE AN A UTHORITY ACTING ON BEHALF OF THE GOVERNMENT FOR THE PURPOSES OF SECTION 68-A OF THE ANDHRA PRADESH EXCISE ACT, 1968. ' 16. THE APPELLANT IS ALSO REPRODUCING THE PROVISION S OF SEE.68 A OF EXCISE ACT WHICH IS AS UNDER: '68-A: EXEMPTION OF THE GOVERNMENT FROM TAKING OUT LICENCE OR PERMIT FOR PRODUCTION, MANUFACTURE, ETC., OF ANY INTOXICANT:- NOTWITHSTANDING ANYTHING IN THIS ACT, IT SHALL NOT BE NECESSARY FOR THE GOVERNMENT OR ANY AUTHORITY OR OFFICER ACTING ON THEIR BEHALF TO TAKE OUT A LICENCE OR PERMIT UNDER THIS ACT FOR THE PRODUCTION, MANUFACTURE, POS SESSION, IMPORT, EXPORT, RANSPORT, SALE OR PURCHASE OF ANY INTOXICANT.' 17. THE APPELLANT SUBMITS THAT AS PER THE ABOVE, IT WILL BE VERY CLEAR THAT THE APPELLANT ACTING AS AN AUTHORITY ON BEHALF OF THE STATE HAS C ARRIED ON THE TRADE AND NOT ON ITS OWN. IT HAS NOT OBTAINED ANY LICENCE TO CARRYON THE TRAD E. MERELY BECAUSE THE STATE HAS CREATED THIS CORPORATION FOR CARRYING ON WHOLE SALE TRADE IN LIQUOR, IT COULD NOT HAVE CARRIED ON THE BUSINESS. 18. ATTENTION IS ALSO INVITED ONCE AGAIN TO THE DEC ISION OF SUPREME COWT IN THE CASE OF STATE OF KERALA AND OTHERS VS. KANDATH DISTILLERIES CITED SUPRA. AS HELD BY THE APEX COURT THE APPELLANT WITHOUT THE AUTHORITY THAT IS C ONFERRED BY THE STATE COULD NOT HAVE CARRIED ON THE TRADE. AS SUCH THE INCOME FROM SUCH TRADE WHICH IS CARRIED ON WITH THE LICENCE OF THE STATE BELONGS TO THE STATE AND CAN N EVER BELONG TO THE APPELLANT WHICH HAD NO LICENSE. ALSO ONCE AGAIN THE APPELLANT INVIT ES ATTENTION OF THE HON'BLE TRIBUNAL TO RELEVANT EXTRACTION FROM THE DECISION OF SUPREME CO URT IN THE CASE OF APSRTC WHEREIN THEIR LORDSHIPS HAS OBSERVED THAT THE STATE CAN EXP LICITLY OR IMPLIEDLY HOLD THE INCOME FROM THE AGENT TO BE THAT OF THE STATE. THE A.P.STA TE, EARLIER IN THE PROVISIONS OF SEC.23- A HAS IMPLIEDLY, BY DIRECTING ENTIRE MARGINS SHALL BE PAID TO THE STATE HAS HELD THE INCOME TO BE THAT OF THE STATE, AND BY GOMS.614 HAS DIRECTED TO REMIT ENTIRE SALE PROCEEDS TO THE STATE TREASURY AND COLLECTING THE M ARGINS. THE APPELLANT FURTHER SUBMITS AS PER PROVISIONS OF ARTICLE 284 OF CONSTITUTION OF INDIA ONCE THE FUNDS OF THE STATE OR CENTRAL ARE DIRECTED TO BE DEPOSITED IN THE PUBLIC ACCOUNT OF STATE OR CENTRAL AND SUCH REMITTANCES ARE OTHER THAN REVENUES OR PUBLIC MONEY S RAISED OR RECEIVED BY THE STATE OR CENTRE IT BELONG TO THE STATE. THE RELEVANT ARTICLE IS REPRODUCED HERE UNDER: '284. CUSTODY OF SUITORS DEPOSITS AND OTHER MONEYS RECEIVED BY PUBLIC SERVANTS AN COURTS ALL MONEYS RECEIVED BY OR DEPOSITED WITH (A) ANY OFFICER EMPLOYED IN CONNECTION WITH THE AFF AIRS OF THE UNION OR OF A STATE IN HIS CAPACITY AS SUCH, OTHER THAN REVENUES OR PUB LIC MONEYS RAISED OR RECEIVED BY THE GOVERNMENT OF INDIA OR THE GOVERNMENT OF THE STATE, AS THE CASE MAY BE, OR 22 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. (B) ANY COURT WITHIN THE TERRITORY OF INDIA TO THE CREDIT OF ANY CAUSE, MATTER, ACCOUNT OR PERSONS, SHALL BE PAID INTO THE PUBLIC A CCOUNT OF INDIA OR THE PUBLIC ACCOUNT OF THE STATE, AS THE CASE MAY BE' 19. AS PER THE GO MS.NO.614 ISSUED BY GOVT. OF ANDH RA PRADESH THE SALE PROCEEDS ARE REMITTED TO THE PUBLIC DEPOSIT ACCOUNT AND AS PER T HE ABOVE CONSTITUTIONAL PROVISION CITED ABOVE, THE INCOME BELONGS TO STATE. ITS USAGE IS REGULATED BY THE SAID GO IN ACCORDANCE WITH ARTICLE 283 OF CONSTITUTION OF INDI A WHICH IS REPRODUCED HERE UNDER: '283. CUSTODY, ETC OF CONSOLIDATED FUNDS, CONTINGEN CY FUNDS AND MONEYS CREDITED TO THE PUBLIC ACCOUNTS (1) THE CUSTODY OF THE CONSOLIDATED FUND OF INDIA A ND THE CONTINGENCY FUND OF INDIA, THE PAYMENT OF MONEYS INTO SUCH FUNDS, THE WITHDRAW AL OF MONEYS THEREFROM, THE CUSTODY OF PUBLIC MONEYS OTHER THAN THOSE CREDITED TO SUCH FUNDS RECEIVED BY OR ON BEHALF OF THE GOVERNMENT OF INDIA, THEIR PAYMENT IN TO THE PUBLIC ACCOUNT OF INDIA AND' THE WITHDRAWAL OF MONEYS FROM SUCH ACCOUNT AND ALL OTHER MATTERS CONNECTED WITH OR ANCILLARY TO MATTERS AFORESAID SHALL BE REGULATED B Y LAW MADE BY PARLIAMENT, AND, UNTIL PROVISION IN THAT BEHALF IS SO MADE, SHALL BE REGUL ATED BY RULES MADE BY THE PRESIDENT (2) THE CUSTODY OF THE CONSOLIDATED FUND OF A STATE AND THE CONTINGENCY FUND OF A STATE, THE PAYMENT OF MONEYS INTO SUCH FUNDS, THE W ITHDRAWAL OF MONEYS THEREFROM, THE CUSTODY OF PUBLIC MONEYS OTHER THAN THOSE CREDITED TO SUCH FUNDS, RECEIVED BY OR ON BEHALF OF THE GOVERNMENT OF THE STATE, THEIR PAYMEN T INTO THE PUBLIC ACCOUNT OF THE STATE AND WITHDRAWAL OF MONEYS FROM SUCH ACCOUNT AND ALL OTHER MATTERS CONNECTED WITH OR ANCILLARY TO MATTERS AFORESAID SHALL BE REGULATED B Y LAW MADE BY THE LEGISLATURE OF THE STATE, AND, UNTIL PROVISION IN THAT BEHALF IS SO MA DE, SHALL BE REGULATED BY RULES MADE BY THE GOVERNOR OF THE STATE' 20. THEREFORE THE APPELLANT RESPECTFULLY SUBMITS TH AT IT NEVER GOT ANY RIGHT WHATSOEVER ON THE INCOME FROM WHOLE SALE TRADE IN LIQUOR AND T HEREFORE IT WILL NOT BE CORRECT EITHER TO STATE IT AS THE INCOME OF THE APPELLANT OR PAYMENT TO STATE IS APPROPRIATION OF PROFITS. 21. THE APPELLANT FURTHER SUBMITS THAT THE DECISION RELIED UPON BY THE LEARNED CIT(A) IN THE CASE OF A.P. STATE CIVIL SUPPLIERS CORPORATION OF A.P.HIGH COURT TO HOLD THAT THE INCOME OF THE APPELLANT IS DISTINCT FROM THAT OF TH E STATE HAS NO APPLICATION, SINCE IN THAT CASE THE INCOME IS NOT FROM A TRADE WHICH IS WITHIN EXCLUSIVE DOMAIN OF THE STATE AND FURTHER IN THOSE CASES THE TRADE IS NOT CARRIED ON AS AGENT OF THE STATE, NOR THE FUNDS ARE CREDITED TO THE PD ALC OF THE STATE. THE APPELLANT REITERATES THAT ITS CLAIM NEVER IS THAT IT IS AN INSTRUMENTALITY OF THE STATE AND HENCE ITS IN COME IS EXEMPT AS IN THE CASE OF A.P.S.CIVIL SUPPLIES CORPORATION. THE APPELLANT'S C LAIM RELATE ONLY TO THE INCOME FROM WHOLESALE TRADE IN INTOXICANT. IN VIEW OF THESE DIS TINCTIVE FEATURES THOSE DECISIONS HAS NO APPLICATION AT ALL, AND RELIANCE ON SUCH DECISIO NS IS TOTALLY MISPLACED. 23 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 22. THE NEXT GROUND RELATE TO TREATING THE PAYMENTS TO THE STATE AS APPLICATION OF INCOME BY THE LEARNED CIT(A): THE LEARNED CIT(A) HAVING OBSERVED THAT THE INCOME BELONG TO THE APPELLANT HAS HELD PAYMENTS TO THE STATE IS NOTHING BUT APPROPRIATION OF PROFIT. THE APPELLANT SUBMITS THAT SUCH A CONCLUSION IS TOTALLY PERVERSE WITHOUT APPRE CIATING THE FACTS. THE PROVISIONS OF SEC.23-A AS IT STOOD THEN OR THE AMENDED PROVISIONS CATEGORICALLY HOLD THAT THE TRADE IN INTOXICANTS B,ELONG TO THE STATE, AND HAVING BEING CONFERRED THE PRIVILEGE TO CARRYON SUCH TRADE BY THE STATE, THE APPELLANT SHOULD REMIT THE MARGINS TO THE STATE. ONCE PAYMENTS ARE AS PER THE STATUTE FOR CONFERRING THE PRIVILEGE, IT AMOUNTS DIVERSION BY OVER RIDING TITLE OR BUSINESS EXPENDITURE. IN THIS REGARD KIND ATTENTION OF THE HONOURABLE I.T.A.T., IS INVITED TO THE DECISION OF THIS TRIBUN AL IN THE CASE OF M/S.SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVELOPMENT CO, REPORTED IN 88 DTR (HYD)(TRIB) 65 WHEREIN IT WAS HELD THAT PAYMENT OF PREDETERMINED ANTICIPATED PROF ITS BY THE ASSESSEE DEVELOPER TO THE LANDOWNER AS A COMPONENT OF LAND COMPENSATION FOR T HE LAND TRANSFERRED BY THE LATTER TO THE ASSESSEE AS PER THE TERMS OF THE CONTRACTUAL AG REEMENT UNDER WHICH THE ASSESSEE COMPANY CAME INTO EXISTENCE CANNOT BE SAID TO BE DI VERSION OF PROFITS TO THE LANDOWNER AND THE SAME IS ALLOWABLE AS BUSINESS EXPENDITURE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 23. IN THE APPELLANT'S CASE THE APPELLANT ITSELF CA ME INTO EXISTENCE BY VIRTUE OF AN ACT OF 1993 WHICH IS REFERRED TO ABOVE. WHILE BRINGING INT O EXISTENCE THE APPELLANT COMPANY, THE STATUTE INSERTED EXPLANATION TO THE EFFECT THAT THE APPELLANT SHALL ACT AS AN AUTHORITY ON BEHALF OF THE STATE. THE STATE BY VIRTUE OF GO M S 614 HAS DIRECTED THE APPELLANT TO REMIT ENTIRE SALE PROCEEDS TO THE STATE TREASURY. T HE PROVISIONS OF SEC.23-A AS IT EXISTED THEN, CATEGORICALLY STATES THAT IN LIEU OF CONFERRING THE PRIVILEGE OF WHOLE SALE TRADE ENTIRE MARGIN SHALL BE REMITTED TO THE STATE. ALL THESE READ TOGETHER CLEARLY DEMONSTRATE THAT THE PROFITS ARE TO BE PAID TO THE STATE AND THE APPELLANT WAS CREATED FOR THAT PURPOSE ONLY. THEREFORE THE APPELLANT SUBM ITS THAT BUT FOR CONFERRING SUCH RIGHT THE APPELLANT COULD NOT HAVE CARRIED ON THE BUSINES S AND IF THE STATE DIRECT THAT IT SHALL PAY FOR CONFERRING SUCH RIGHT AS PRIVILEGE FEE THE ENTIRE MARGIN IT SHALL PAY. THE PROFITS NEVER REACHED THE APPELLANT AND IT CANNOT BE HELD A S APPLICATION OF INCOME OR APPROPRIATION OF PROFITS. ONLY IF THE APPELLANT EAR NED SUCH INCOME ON ITS OWN THEN IT COULD HAVE BEEN SO. IN THE APPELLANT'S CASE, IT IS EVIDENT THAT THE APPELLANT HAS NO CAPACITY TO EARN ON ITS OWN FROM THE WHOLESALE TRAD E IN LIQUOR SINCE IT HAS NO LICENCE. IT CARRIED ON THE TRADE ACTING AS AN AUTHORITY ON BEHA LF OF THE STATE AND THEREFORE THE PROFITS BELONG TO THE STATE AND WHATEVER PAYMENTS T HAT ARE MADE TO THE STATE IS EITHER DIVERSION BY OVER RIDING TITLE OR BUSINESS EXPENDIT URE. THE APPELLANT THEREFORE SUBMITS THAT THE FINDING OF THE LEARNED CIT(A) THAT IT IS N OTHING BUT APPROPRIATION OF PROFITS IS ERRONEOUS, CONTRARY TO FACTS AND LEGAL POSITION ON THIS ISSUE. 24. IT WAS FURTHER BROUGHT TO THE NOTICE OF THE LEA RNED CIT(A) THAT IN THE PROCEEDINGS UJS.263 OF I.T.ACT FOR THE A.Y.2002-03, THE THEN CI T IN ,HIS SHOW CAUSE LETTER PROPOSED TO TREAT THE PAYMENTS AS APPLICATION OF INCOME OR A PPROPRIATION OF PROFITS BUT HAS NOT PASSED ANY ORDER AFTER HAVING THE SUBMISSIONS ON TH E SAME. A COPY OF THE SHOW CAUSE 24 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. LETTER DT.2-2-2006 IS PLACED AT PAPER BOOK PAGE 123 AND ORDER UJS.263 DT.20-3-2006 IS PLACED AT PAGE 124 OF THE PAPER BOOK. THE APPELLANT SUBMITS THAT NOT PASSING OF AN ORDER AFTER ISSUE OF SHOW CAUSE LETTER AND RECEIVIN G SUBMISSION TANTAMOUNT TO ACCEPTANCE OF SUCH SUBMISSIONS. IN THIS REGARD KIND ATTENTION OF THE HON'BLE TRIBUNAL IS INVITED TO THE JUDGEMENT OF A.P.HIGH COURT IN THE C ASE OF SPECTRA SHARES REPORTED IN 354 ITR 35, WHERE IN THEIR LORDSHIPS WHILE DEALING WITH AN APPEAL AGAINST ORDER UJS.263 SUSTAINED BY I.T.A.T., HAS HELD SO. THE RELEVANT PO RTION IS AS UNDER: 'THE CONTENTION OF THE REVENUE THAT THERE ARE NO RE ASONS GIVEN BY THE ASSESSING OFFICER ABOUT THE NATURE OF ACTIVITY OF THE ASSESSE E CANNOT BE ACCEPTED BECAUSE A QUERY WAS RAISED BY HIM IN THE C OURSE OF THE ASSESSMENT PROCEEDINGS AND WAS REPLIED BY THE ASSESSEE. OBVIOU SLY, HE WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND THEREFORE DID NOT T HINK THAT THE ISSUE NEEDS TO BE SPECIFICALLY MENTIONED. IT IS SETTLED LAW THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED REASONS AND ONCE IT IS CLEAR THAT THERE WAS APPLICA TION OF MIND BY AN ENQUIRY, THE RESPONDENT, MERELY BECAUSE HE ENTERTAINS A DIFFEREN T OPINION IN THE MATTER, CANNOT INVOKE HIS POWERS ULS. 263 OF THE ACT. IT IS THEREF ORE NOT CORRECT TO SAY THAT THERE WAS NO PROPER ENQUIRY BY THE ASSESSING OFFICER'. 25. THE APPELLANT THEREFORE SUBMITS THAT THE FINDIN G OF THE LEARNED C!T(A) THAT IT IS APPROPRIATION OF PROFITS IS CONTRARY TO ACCEPTED PR INCIPLES OF JUDICIAL DISCIPLINE. AN AUTHORITY OF EQUAL RANK HAS EARLIER EXAMINED THIS I SSUE AND HELD IT TO BE NOT SO. NOW THE C!T(A) IS NOT EXPECTED TO TAKE A DIFFERENT STAND UN LESS THERE IS CHANGE IN FACTS OR LAW. IN THE APPELLANT'S CASE ADMITTEDLY THERE IS NO SUCH CH ANGE IN FACTS OR LAW. 26. THE NEXT GROUND RELATE TO THE FINDING OF THE LE ARNED CIT(A) WHICH IS AS UNDER; '4.10. AS PER NEW SECTION 4B, THE AMOUNT OF PRIVILE GE FEE NEEDS TO BE REMITTED TO GOVERNMENT IN THE MANNER SPECIFIED BY THE GOVERNMEN T. HOWEVER, THE MANNER OF COMPUTATION IS NOT SPECIFIED UJS.4B. THEREFORE, THE COMPUTATION STILL NEEDS TO BE MADE UJS.23A (THOUGH THE SECTION 23A IS OMITTED, IN ABSE NCE OF ANY COMPUTATION FORMULA) WHICH SPECIFIES THAT THE MARGINS AFTER MEETING EXPE NDITURE SHALL BE PAID AS PRIVILEGE FEES. IN THIS CONTEXT, THE STAND OF THE DEPARTMENT THAT INCOME . TAX IS AN EXPENSE IN COMMERCIAL SENSE AND AS PER THE MANDATE IN AS 22 RE MAINS UNASSAILED. THERE IS A PRIMARY DISTINCTION BETWEEN THE CASE OF THE APPELLA NT AND THAT OF THE CORPORATION OF OTHER STATES. IN THE CASE OF THE APPELLANT, IT MAKES ITS OWN COMPUTATIONS, DERIVES THE SURPLUS AT THE END OF THE DAY AND PAYS THE SAME IN THE NAME OF 'FEE~ WHEREAS IN OTHER CASE, THE 'FEE' IS A FIXED AMOUNT UNDER THE RULES OR A SPECIF IC AMOUNT BASED ON STOCK QUANTITY DETERMINED AS PER THE RULES. IF SECTION 23 A GETS R EPEALED ON A NOTIFIED DATE, EVEN THIS MECHANISM WOULD FAIL LEAVING NO BASIS FOR COMPUTATI ON' 27. THE APPELLANT SUBMITS THAT THE ABOVE FINDING IS TOTALLY PERVERSE HAVING MADE WITHOUT 25 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. PROPER APPRECIATION OF THE FACTS OF THE CASE AND TH E PROVISIONS OF SEC.4B OF THE AMENDED ACT. THE APPELLANT IS REPRODUCING THE PROVI SIONS OF SEC.4B AS UNDER: REMITTANCE TO THE GOVERNMENT: SEE. 4-B:THE AMOUNT REALIZED UNDER SECTION 4-A BEING THE INCOME OF THE GOVERNMENT/ SHALL BE REMITT ED BY THE A.P.BEVERAGES CORPORATION LTD./ TO THE GOVERNMENT IN THE MANNER S PECIFIED BY THE GOVERNMENT. PRIVILEGE FEE ETC., ULS.23(1), 23-A AND 23-8 OF THE AP.EXCISE ACT TO BE THE INCOME OF THE GOVERNMENT : SEE.4-C: NOTWITHSTANDING ANYTHING CONTAINED IN TH IS ACT/ THE AP EXCISE ACT/ 1968 AND THE RULES MADE THERE UNDER OR ANY ORDER ISSUED BY THE GOVERNMENT OR THE COMMISSIONER OF PROHIBITION AND E XCISE/ ALL AMOUNTS PAID BY THE CORPORATION FROM 21-7-1993 TO THE COMMISSIONER OF P ROHIBITION AND EXCISE OR THE GOVERNMENT AS PRIVILEGE FEE OR SPECIAL PRIVILEGE FE E OR ANY OTHER FEE OR CESS/ BY WHATEVER NAME CALLED/ IN CONSIDERATION OF THE PRIVI LEGE CONFERRED ON THE CORPORATION/ AS PER THE PROVISIONS OF SECTIONS 23(1)/ 23-A AND 23-B OF THE A.P.EXCISE ACT/ 1968 SHALL BE DEEMED TO BE AND ALWAYS DEEMED TO HAVE BEEN THE INC OME OF THE GOVERNMENT AND DUE PAYMENT FOR THE RELEVANT YEARS IN TERMS OF SECTION 4-B. 28. THE APPELLANT SUBMITS THAT REFERENCE TO SEC.4-B BY THE LEARNED C!T(A) IS ABSOLUTELY INCORRECT. THIS PROVISION IS PROSPECTIVE PROVISION AND NOT RETROSPECTIVE PROVISION TO APPLY TO THE ASSESSMENT YEAR IN QUESTION. THE RELEVANT PR OVISION IN THE AMENDED ACT IS SECAC WHICH WAS REPRODUCED HEREIN ABOVE. AS PER THI S PROVISION, ALL THE PAYMENTS THAT ARE MADE AS PER THE EARLIER PROVISIONS SEC.23(1), 2 3A AND 23-B ARE DEEMED TO HAVE BEN AND ALWAYS DEEMED TO HAVE BEEN INCOME OF THE ST ATE AND DUE PAYMENT FOR THE RELEVANT YEARS IN TERMS OF SEC.4B. THEREFORE THE QU ESTION OF REQUIREMENT AS PER SEC.4B FOR THIS YEAR DOES NOT ARISE SINCE BY A DEEMING PRO VISION IT IS HELD TO BE PAYMENT UNDER TERMS OF SECAB. EVEN OTHERWISE THE LEARNED C!T(A) N EVER TRIED TO FIND OUT WHETHER ANY MANNER IS SPECIFIED IN ACCORDANCE WITH SECTION 4 B, SINCE THE GOVERNMENT HAS ISSUED GO SPECIFYING HOW THEY SHOULD BE PAID. IT IS ONLY T HE HEAD OF ACCOUNT. FURTHER SEC.4A CATEGORICALLY STATES THAT THE MARGINS ETC., ARE FIX ED BY STATE FROM TIME TO TIME AND 4 B ONLY SPECIFIES THAT SUCH MARGINS FIXED FROM TIME TO TIME TO BE PAID IN THE MANNER SPECIFIED TO MEAN THE HEAD OF ACCOUNT TO WHICH IT S HOULD BE PAID AND DOES NOT REQUIRE ANY COMPUTATION AS IMAGINED BY THE LEARNED C!T(A). 29. FOR ANOTHER REASON THE ABOVE CITED FINDINGS OF THE LEARNED CIT(A) ARE FACTUALLY INCORRECT. THE LEARNED CIT(A) OBSERVED THAT THE PAY MENT OF FEE IN THE APPELLANT'S CASE IS NOT FIXED AND THAT THE APPELLANT DOES ARRIVE AT THE AMOUNT PAYABLE AT THE END OF THE DAY. IT IS SUBMITTED THAT THE STATE BY GO FIXES THE MARG INS ON DIFFERENT ITEMS AND THE SAME IS BEING PAID TO THE STATE. THEREFORE IT IS FACTUALLY INCORRECT TO STATE THAT THE FEE IS NOT FIXED. KIND ATTENTION OF THE HON'BLE TRIBUNAL IS INVITED T O THE ASSESSMENT ORDER WHEREIN THE AO HIMSELF ACCEPTS THIS FACT THAT THE MARGINS ARE FIXE D BY THE STATE. THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS AS UNDER; '2.4 MARGIN OVER COST PRICE ON EACH BRAND ETC., IS FIXED BY THE GOVERNMENT OF ANDHRA PRADESH THROUGH THEIR G. O. HOW THE RATE IS FIXED I S INDICATED IN ONE OF THE GOS DATED 26 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 11.11.2009 (ENCLOSED AS PAGE NOS. 14&15). A READING OF THIS SHOWS THAT ABOVE THE BASIC COST PRICE THE MARGIN CAN GO UP TO EVEN 380/0 . IN ESSENCE BOTH THE PURCHASE PRICE AND SALE PRICE ARE DETERMINED BY THE GOVERNME NT OF ANDHRA PRADESH. THE MARGIN IS ALSO SEPARATELY DETERMINED BY THE GOVERNMENT OF ANDHRA PRADESH. ' 30. THE ATTENTION OF THE LEARNED CIT(A) WAS DRAWN T O THE LETTER FILED BEFORE THE AO DT.22-12-2010 (PAPER BOOK PAGE 26) WHEREIN THE PROC EDURE ADOPTED WAS EXPLAINED AND ALSO TO THE GO.MS.614 CITED SUPRA (PAPER BOOK PAGE 223) TO SUBSTANTIATE THAT THE APPELLANT HAS NO CONTROL OVER THE FUNDS AND THAT EN TIRE SALES GET REMITTED TO THE STATE AS PER GO AND THAT THE APPELLANT GETS THE EXPENDITURE INCURRED THROUGH A OD ACCOUNT WHICH AGAIN IS FUNDED BY THE DIRECTOR DISTILLERIES. THE GO CITED ABOVE DEMONSTRATES THAT THE DIRECTOR OF DISTILLERIES ARRIVES AT THE PR IVILEGE FEE PAYABLE TO THE STATE TO RETAIN THE SAME. THEREFORE THE LEARNED CIT(A) WITHOUT LOOK ING INTO ANY 'OF THESE SUBMISSION WHICH ARE FACTS AND GOVERNMENT ORDERS HAS PATENTLY ERRED IN HOLDING THAT THERE IS NO MECHANISM TO ARRIVE AT THE PAYMENT. 31. LASTLY, THE LEARNED CIT(A) COMMITTED CONTEMPT O F SUPREME COURT IN HOLDING THAT THE FEE SHOULD BE FIXED THOUGH IT IS BROUGHT TO THE NOT ICE OF THE LEARNED CIT(A) THAT WHAT IS PAID TOWARDS PRIVILEGE IS NOT A FEE BUT A CONSIDERA TION AS HELD BY SUPREME COURT IN VARIOUS DECISIONS THAT ARE REFERRED TO IN THE DECIS ION OF MC DOWELS BESIDES THE ONE IN THE CASE OF SHEOPAT RAI ALREADY REFERRED TO SUPRA. THE RELEVANT PORTION OF THE DECISION IS AS UNDER; MC DOWELS REPORTED IN 314 ITR 167 WHERE IT HAS HEL D AS UNDER: BUSINESS EXPENDITURE DISALLOWANCE U/S 43B-BOTTLI NG FEES UNDER EXCISE LAW- BOTTLING FEES FOR ACQUIRING A RIGHT OF BOTTLING OF IMFL DETERMINED UNDER THE EXCISE ACT AND RULES FRAMED THEREUNDER PAYABLE BY ASSESSEE AS CONSIDERATION FOR GRANT OF APPROVAL BY THE GOVERNMENT IS NOT TAX, DUTY, CES S OR FEE FOR THE PURPOSES OF S. 43B-EXPRESSION NOW USED IN S. 43B(I)(A) IS 'TAX, DU TY, CESS OR FEE, BY WHATEVER NAME CALLED'-BY APPLICATION OF RULE OF EJUSDEM GENE RIS, THE EXPRESSION 'BY WHATEVER NAME CALLED' MUST FALL WITHIN THE GENUS 'T AXATION' TO WHICH EXPRESSIONS 'TAX~ 'DUTY~ 'CESS' OR 'FEE' AS A GROUP OF ITS SPEC IE BELONG BY WAY OF COMPULSORY EXACTION IN THE EXERCISE OF STATE'S POWER OF TAXATI ON-WHERE LEVY AND COLLECTION IS DULY AUTHORISED BY LAW AS DISTINCT FROM AMOUNT CHAR GEABLE ON PRINCIPLE AS CONSIDERATION PAYABLE UNDER CONTRACTTHIGH COURT WAS JUSTIFIED IN HOLDING THAT THE AMOUNT DOES NOT FALL WITHIN THE PURVIEW OF S. 43B SEE. 43B AFTER AMENDMENT W.E.F. 1ST APRIL, 1989 REF ERS TO ANY SUM PAYABLE BY ASSESSEE BY WAY OF TAX, DUTY OR FEE BY WHATEVER NAM E CALLED UNDER ANY LAW FOR THE TIME BEING IN FORCE. THE BASIC REQUIREMENT, THE REFORE, IS THAT THE AMOUNT PAYABLE MUST BE BY WAY OF TAX, DUTY AND CESS UNDER ANY LAW FOR THE TIME BEING IN FORCE. THE BOTTLING FEES FOR ACQUIRING A RIGHT OF B OTTLING OF IMFL WHICH IS DETERMINED UNDER THE EXCISE ACT AND R. 69 OF THE CE NTRAL EXCISE RULES IS PAYABLE BY THE ASSESSEE AS CONSIDERATION FOR ACQUIRING THE EXCLUSIVE PRIVILEGE. IT IS NEITHER FEE NOR TAX BUT THE CONSIDERATION FOR GRANT OF APPROVAL BY THE GOVERNMENT 27 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. AS TERMS OF CONTRACT IN EXERCISE OF ITS RIGHTS TO E NTER A CONTRACT IN RESPECT OF THE EXCLUSIVE RIGHT TO DEAL IN BOTTLING LIQUOR IN ALL I TS MANIFESTATIONS. IT WOULD BE PERTINENT TO NOTE THAT THE EXPRESSION NOW USED IN S . 438(I)(A) IS 'TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED'. IT DENOTES THAT ITEM S ENUMERATED CONSTITUTE SPECIES OF THE SAME GENUS AND THE EXPRESSION 'BY WH ATEVER NAME CALLED' WHICH FONOWS PRECEDING WORDS 'TAX', 'DUTY', 'CESS' OR 'FE E' HAS BEEN USED EJUSDEM GENERIS TO CONFINE THE APPLICATION OF THE PROVISION S NOT ON THE BASIS OF MERE NOMENCLATURES, BUT NOTWITHSTANDING NAME, THEY MUST FALL WITHIN THE GENUS 'TAXATION' TO WHICH EXPRESSIONS 'TAX', 'DUTY', 'CES S' OR 'FEE' AS A GROUP OF ITS SPECIE BELONG VIZ. COMPULSORY EXACTION IN THE EXERCISE OF STATE'S POWER OF TAXATION WHERE LEVY AND COLLECTION IS DULY AUTHORISED BY LAW AS DISTINCT FROM AMOUNT CHARGEABLE ON PRINCIPLE AS CONSIDERATION PAYABLE UN DER CONTRACT. 'TAX', 'DUTY', 'CESS' OR 'FEE' CONSTITUTING A CLASS DENOTES TO VARIOUS KINDS OF IMPOSTS BY STATE IN ITS SOVEREIGN POWER OF TAXATION TO RAIS E REVENUE FOR THE STATE. WITHIN THE EXPRESSION OF EACH SPECIE EACH EXPRESSION DENOT ES DIFFERENT KIND OF IMPOST DEPENDING ON THE PURPOSE FOR WHICH THEY ARE LEVIED. THIS POWER CAN BE EXERCISED IN ANY OF ITS MANIFESTATION ONLY UNDER ANY LAW AUTH ORISING LEVY AND COLLECTION OF TAX AS ENVISAGED UNDER ART. 265 WHICH USES ONLY EXP RESSION THAT NO 'TAX' SHALL BE LEVIED AND COLLECTED EXCEPT AUTHORIZED BY LAW. IT I N ITS ELEMENTARY MEANING COVEYS THAT TO SUPPORT A TAX LEGISLATIVE ACTION IS ESSENTIAL, IT CANNOT BE LEVIED AND COLLECTED IN THE ABSENCE OF ANY LEGISLATIVE SANCTIO N BY EXERCISE OF EXECUTIVE POWER OF STATE UNDER ART. 73 BY THE UNION OR ART. 1 62 BY THE STATE. UNDER ART. 366(28) 'TAXATION' HAS BEEN DEFINED TO INCLUDE THE IMPOSITION OF ANY TAX OR IMPOST WHETHER GENERAL OR LOCAL OR SPECIAL AND TAX SHALL B E CONSTRUED ACCORDINGLY. 'IMPOST' MEANS COMPULSORY LEVY. THE WELL KNOWN AND WELL SETTLED CHARACTERISTIC OF 'TAX' IN ITS WIDER SENSE INCLUDES ALL IMPOSTS. I T WAS THE DUTY OF REVENUE AUTHORITIES TO ASCERTAIN WHETHER THE DEDUCTION WHIC H IS TO BE TESTED ON THE TOUCHSTONE OF S. 43B(A) IS THE AMOUNT PAYABLE BY WA Y OF TAX OR DUTY OR FEE OR CESS. THE HIGH COURT WAS JUSTIFIED IN HOLDING THAT THE AMOUNT DOES NOT FALL WITHIN THE PURVIEW OF S. 43B.-AMAR CHANDRA VS. CCE AIR 197 2 SC 1863 AND HOUSING BOARD OF HARYANA VS. HARYANA AIR 1996 SC 434 RELIED ON; STATE OF BOMBAY VS. F.N. BALSARA AIR 1951 SC 318 AND HAR SHANKAR VS. DY . EXCISE & TAXATION COMMR. AIR 1975 SC 1121 APPLIED; CIT VS. UDAIPUR DI STILLERV CO. LTD. (2004) 186 CTR (RAJ) 1 AFFIRMED. BOTTLING FEES FOR ACQUIRING A RIGHT OF BOTTLING OF IMFL DETERMINED UNDER THE EXCISE ACT AND RULES FRAMED THERE UNDER PAYABLE BY ASSESSEE AS CONSIDERATION FOR GRANT OF APPROVAL BY THE GOVERNME NT IS NOT TAX, DUTY, CESS OR FEE FOR THE PURPOSES OF S. 43B. 32. THE APPELLANT THEREFORE SUBMITS THAT THE CONCLU SION OF THE LEARNED C!T(A) THAT 'THE PRIVILEGE FEE PAID IS NOT ALLOWABLE IN VIEW OF AS 2 2 AND NOT PROVIDING FOR INCOME-TAX', HAS NO BASIS AND IS NOT TENABLE AT ALL. EVEN AS PER AS 22 INCOME ON WHICH TAX IS TO BE PROVIDED IS TO BE WORKED OUT IN ACCORDANCE WITH TAX ATION LAWS AND THE PAYMENT TO STATE 28 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. IS AN ALLOWABLE EXPENDITURE AND AFTER CONSIDERING S UCH EXPENDITURE, THERE IS NO INCOME ON WHICH TAX IS REQUIRED TO BE PAID. THEREFORE ONCE AGAIN TO STATE THAT 'THE STAND OF THE DEPARTMENT THAT THE INCOME TAX IS AN EXPENSE IN COM MERCIAL SENSE AS PER AS-22 REMAINS UNASSAILED' IS WITHOUT PROPER APPRECIATION OF THE FACTS. THIS SUBMISSION IS MADE WITHOUT PREJUDICE TO THE STAND THAT AS-22 DOES NOT COME INTO OPERATION WHEN THE APPELLANT HAD TO REMIT THE AMOUNTS TO STATE AFTER R ETAINING EXPENDITURE. AS SUBMITTED EARLIER, THE ENTIRE PROCEEDS GO INTO STATE COFFERS AND AS PER ARTICLE 284 OF CONSTITUTION OF INDIA THEY BECOME THE REVENUES OF THE STATE AND AS PER GO 614 CITED ABOVE, THE APPELLANT CORPORATION IS ALLOWED TO DRAW EXPENSES A ND ALSO PAYMENTS TO VENDORS. THE QUESTION OF APPLICATION OF AS 22 NEVER COMES INTO Q UESTION. 33. NEXT THREE GROUNDS NO.8,9 AND 10 RELATE APPLICA TION OF THE DECISION OF SUPREME COURT IN THE CASE OF APSRTC AND APPLICATION OF ARTI CLE 289 OF CONSTITUTION. THE APPELLANT SUBMITS THAT THE LEARNED CIT(A) BY RE FERRING TO THE DECISION OF A.P.HIGH COURT IN THE CASE OF A.P.STATE CIVIL SUPPLIES CORPO RATION HELD THAT INCOME OF THE CORPORATION IS DISTINCT FROM THAT OF THE STATE AND IF SECTION 4C NEWLY INSERTED IS INTERPRETED TO THE CONTRARY TO MEAN THAT THE INCOME OF THE CORPORATION IS THAT OF THE STATE, THAT WOULD IMPLY THAT LEGISLATION IS PASSED BY A STATE ON A SUBJECT ON WHICH CENTRE IS ONLY COMPETENT TO LEGISLATE (THAT IS ON I NCOME TAX MATTERS/EXEMPTING AN APPELLANT FROM INCOME-TAX). THE APPELLANT SUBMITS T HAT IN ITS WRITTEN SUBMISSIONS IT HAS REFERRED TO THE DECISION OF THE SUPREME COURT IN TH E CASE OF A.P.S.R.T.C. REPORTED IN 52 ITR 524 AND DREW PARTICULAR ATTENTION TO THE FOLLOW ING PARAGRAPH FROM THAT ORDER THE SAME IS REPRODUCED HERE FOR READY REFERENCE: 15. IT MAY BE THAT THE STATUTE UNDER WHICH A NOTIFI CATION HAS BEEN ISSUED CONSTITUTING THE APPELLANT CORPORATION MAY PROVIDE EXPRESSLY OR BY NECESSARY IMPLICATION THAT THE INCOME DERIVED BY THE CORPORAT ION FROM ITS TRADING ACTIVITY WOULD BE THE INCOME OF THE STATE. THE DOCTRINE OF T HE SEPARATE ENTITY OR PERSONALITY OF THE CORPORATION IS ALWAYS SUBJECT TO THE EXCEPTIONS WHICH STATUTES MAY CREATE, AND IF THERE IS A STATUTORY PROVISION W HICH CLEARLY INDICATES THAT DESPITE THE CONCEPT OF THE SEPARATE PERSONALITY OF THE CORPORATION, THE CARRIED ON BY IT BELONGS TO THE SHAREHOLDERS WHO BROUGHT THE C ORPORATION INTO EXISTENCE AND THE INCOME RECEIVED FROM THE SAID TRADE LIKEWISE BE LONG~ TO THEM, THAT WOULD BE ANOTHER MATTER. IT WOULD THEN BE POSSIBLE TO HOLD T HAT AS A RESULT OF THE SPECIFIC STATUTORY PROVISIONS THE INCOME RECEIVED FROM THE T RADE CARRIED ON BY THE CORPORATION BELONGS TO THE SHAREHOLDERS WHO HAVE CO NSTITUTED THE SAID CORPORATION, AND SO, WE MUST LOOK TO THE ACT TO DET ERMINE WHETHER THE INCOME IN THE PRESENT CASE CAN BE SAID TO BE THE INCOME OF TH E STATE OF ANDHRA PRADESH 1/. 34. THE APPELLANT SUBMITS THAT THE LEARNED CIT(A) H AS NOT CONSIDERED THIS SUBMISSION AT ALL WHILE CONSIDERING THE DECISION OF THE AP.HIGH C OURT IN THE CASE OF A.P.STATE CIVIL SUPPLIES CORPORATION. THE APPELLANT WHILE MAKING SU BMISSIONS ON OTHER GROUNDS HAS ALREADY DEMONSTRATED AS TO HOW THE INCOME BELONG TO THE STATE WHICH IS SUPPORTED BY A DECISION OF SUPREME COURT IN THE CASE OF SHEOPAT RA I REFERRED SUPRA. AS SUBMITTED 29 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. EARLIER ENTIRE SALE PROCEEDS ARE REMITTED TO THE ST ATE P.O.A/C AND AS PER ARTICLE 284 OF CONSTITUTION OF INDIA AND THE REMITTANCES TO PO A/C BECOME THE REVENUES OF THE STATE. THE APEX COURT IN THE ABOVE JUDGEMENT HAS OBSERVED THAT EVEN WHERE THE AGENT IS A SEPARATE CORPORATION, THE INCOME STILL COULD BE HEL D AS INCOME OF THE STATE IF EXPLICITLY OR IMPLIEDLY THE STATE NOTIFIES SUCH INCOME TO BE I TS INCOME. IN THE APPELLANT'S CASE BY GO 614 THE STATE HAS DIRECTED THE SALE PROCEEDS TO BE DEPOSITED IN PO ALC THEREBY HOLDING IT TO BE INCOME OF THE STATE. THEREFORE IT IS SUBMITTED THAT THE INCOME FROM WHOLESALE TRADE IN LIQUORS IS NOT TAXABLE UNDER ART ICLE 289 OF THE CONSTITUTION OF INDIA. 35. THE HON'BLE TRIBUNAL RECENTLY WHILE DEALING WIT H THE CASE OF A.P.HOUSING BOARD HAS REFERRED TO THIS DECISION AND HAS HELD IN THAT CASE THAT IT CANNOT BE EXEMPTED UNDER ARTICLE 289 OF THE CONSTITUTION OF INDIA. WHEREAS I N THE APPELLANT'S CASE AS COULD BE SEEN FROM THE FACTS THE REVENUES ARE DIRECTLY CREDI TED TO PO ACCOUNT AND AS PER ARTICLE 284 THE AMOUNTS REMITTED TO PO ALC BELONG TO STATE AND THEY CAN BE USED ONLY IN ACCORDANCE WITH ARTICLE 283 OF THE CONSTITUTION. TH IS FEATURE IS NOT THERE IN THE CASE OF A.P.H.B. THEREFORE THE APPELLANT SUBMITS THAT THE O RDER IN THE CASE OF A.P.HOUSING BOARD HAS NO APPLICATION. 36. THE NEXT GROUND NO.11 RELATES TO FINDING THAT P AYMENT TO STATE IS APPLICATION OF INCOME. SUBMISSIONS ON THIS ARE ALREADY MADE. WITHO UT PREJUDICE TO THE SAME, IT IS TO SUBMIT THAT THE HON'BLE TRIBUNAL IN THE EARLIER ROU ND OF PROCEEDINGS FOR THE ABOVE ASSESSMENT YEAR, HAS DIRECTED THE LEARNED C!T(A) TO CONSIDER ONLY THE AMENDMENTS THEREBY IMPLIEDLY REJECTED ALL THE OTHER REASONS FO R HOLDING THE PAYMENTS TO STATE AS NOT ALLOWABLE. APPLICATION OF INCOME ALSO IS ONE OF THE REASONS IN THE EARLIER ORDER. THEREFORE THE APPELLANT SUBMIT THAT THE LEARNED C!T (A) IS NOT CORRECT TO GIVE SUCH FINDING ONCE AGAIN INSTEAD OF CONFINING HERSELF TO THE AMEN DMENTS THAT ARE DIRECTED TO BE CONSIDERED BY THE I.T.A.T. 37. THE NEXT GROUND 12 RELATE TO VALIDITY OF AMENDM ENTS. SUBMISSIONS ARE ALREADY MADE IN RESPECT OF GROUND NO.2. THE APPELLANT PRAY THAT THE SAME MAY BE CONSIDERED FOR THIS GROUND ALSO. 38. THE NEXT GROUND 13 ALSO RELATE TO RETROSPECTIVE AMENDMENT AND SUBMISSIONS ARE ALREADY MADE ON THIS ISSUE IN THE EARLIER GROUND NO .2. 39. THE NEXT GROUND 14 RELATE TO FINDING ON ALLOWAB ILITY UJS.37. THE APPELLANT SUBMIT THAT SUBMISSIONS ARE MADE ON THIS GROUND ALSO WHILE MAKI NG SUBMISSIONS IN THE EARLIER GROUNDS. 40. THE NEXT GROUND 15 RELATE APPLICATION OF AS-22 - THIS ISSUE IS COVERED IN SUBMISSIONS MADE ON OTHER GROUNDS AND PRAYS THE HON OURABLE I.T.A.T., TO CONSIDER THEM. 41. THE NEXT GROUND RELATE TO NOT CONSIDERING THE G ROUND AGAINST DISALLOWANCE OF PROVISIONS FOR LEAVE ENCASHMENT OF RS.30,90,849 IN SPITE OF MAKING SPECIFIC 30 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. SUBMISSIONS. THE APPELLANT SUBMITTED THAT THIS ISSU E IS COVERED BY DELHI HIGH COURT DECISION. THIS SUM REPRESENT OUTSTANDING LEAVE SALA RY PAYABLE OF RS.L0,71,901 AND PENSION CONTRIBUTION PAYABLE OF RS.20,18,948. THE A PPELLANT THEREFORE PRAY THIS HONOURABLE I.T.A.T., TO DIRECT THE AO TO ALLOW THIS DEDUCTION. THESE ARE AMOUNTS DEDUCTED FROM SALARY OF THOSE EMPLOYEES WHO COME ON DEPUTATION. THESE AMOUNTS HAVE TO BE TRANSFERRED TO THE RESPECTIVE DEPARTMENT S WHICH ARE GOVERNMENT DEPARTMENTS. THE CORPORATION FOR THE PERIOD THE EMP LOYEE WORKED WITH THEM, DEDUCTS FROM SALARY AND HAS TO MAKE PAYMENTS TO SUCH DEPART MENTS. IT IS SHOWN AS PROVISION IN THE BALANCE SHEET. THEREFORE THEY DO NOT FALL UNDER THE PROVISIONS OF SEC.43 B, SINCE THEY ARE NOT PROVISION FOR ITS OWN EMPLOYEES. IN CONTINUATION TO THE AFORESAID WRITTEN SUBMISSION S THE ASSESSEE FILED FURTHER SUBMISSIONS CONTENDING AS UNDER:- 1. DURING THE COURSE OF PROCEEDINGS BEFORE THE HONO URABLE I.T.A.T., THE BENCH, WHILE HEARING THE SUBMISSIONS ON REPUGNANCY, HAS ENQUIRED HOW ABOUT SECTION 4 OF I.T.ACT. THE APPELLANT INTENDED TO MAKE SUBMISSIONS ON SUCH ISSUE AT THE END, HOWEVER COULD NOT MAKE THE SAME ON THAT DAY. THEREFORE THE APPELL ANT SUBMITS AS UNDER; THE APPELLANT SUBMITS THAT THE PROVISIONS OF SEC. 4 OF THE I.T.ACT IS ONLY A CHARGING SECTION AND IT READS AS UNDER: 4. (1) WHERE ANY CENTRAL ACT ENACTS THAT INCOME-TAX SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES, INCOME-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARGED FOR THAT YEAR IN ACCORDANCE WITH, AND [SUBJ ECT TO THE PROVISIONS (INCLUDING PROVISIONS FOR THE LEVY OF ADDITIONAL INCOME-TAX) O F, THIS ACT] IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON: PROVIDED THAT WHERE BY VIRTUE OF ANY PROVISION OF T HIS ACT INCOME-TAX IS TO BE CHARGED IN RESPECT OF THE INCOME OF A PERIOD OTHER THA:DHE PRE VIOUS YEAR, INCOME-TAX SHALL BE CHARGED ACCORDINGLY. (2) IN RESPECT OF INCOME CHARGEABLE UNDER SUB-SECTI ON (1), INCOME-TAX SHALL BE DEDUCTED AT THE SOURCE OR PAID IN ADVANCE, WHERE IT IS SO DEDUCTIBLE OR PAYABLE UNDER ANY PROVISION OF THIS ACT. ' 3. THE APPELLANT RESPECTFULLY SUBMIT THAT CHARGING SECTION COMES INTO PLAY ONLY AFTER DETERMINING THE INCOME IN ACCORDANCE WITH INCOME-TA X PROVISIONS. BEFORE DETERMINING THE INCOME, IT IS ALSO REQUIRED TO DETERMINE WHETHE R THE INCOME BELONG TO ASSESSEE OR NOT AND LATER IN ACCORDANCE WITH THE PROVISIONS CON TAINED IN THE ACT, THE INCOME SHOULD BE COMPUTED. 4. IF THE VIEW IS SUCH THAT THE ENACTMENT AMENDING THE PROVISIONS TO 1993 ACT BY THE STATE, HAS INFRINGED THE PROVISIONS OF SEC.4, THE H ONOURABLE I.T.A.T., MAY PLEASE HAVE A 31 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. LOOK AT THE ENACTMENT MADE BY THE STATE OF A.P., WH ICH IS BEING REFERRED TO AS REPUGNANT. ALREADY SUBMISSIONS ARE MADE THAT THERE IS NOTHING IN THE ACT THAT IS REPUGNANT. AT THE COST OF REPETITION, IT IS SUBMITT ED THAT WHAT THE PROVISIONS STATE IS THAT THE MARGINS PAID AS PRIVILEGE FEE, SPECIAL PRIVILEG E ETC., BY WHATEVER NAME CALLED IS THE INCOME OF THE STATE AND IT ALWAYS REMAINED AS INCOM E OF THE STATE. IT IS FURTHER SUBMITTED THAT IF A PARTY CHARGES SOMETHING AND REC EIVES IT, IT IS ACCEPTED THAT SUCH A RECEIPT IN THE HANDS OF THAT PARTY WILL BE ITS INCO ME. THE APPELLANT SUBMITS THAT THERE CANNOT BE ANY DOUBT ON THIS PROPOSITION. THEREFORE THE QUESTION THAT SHOULD BE ADDRESSED BEFORE CONSIDERING THE ISSUE AS TO WHETHE R STATE IS RIGHT IN HOLDING SO OR NOT, IS WHETHER THE STATE HAS RIGHT TO CHARGE AND RECEI VE SUCH AMOUNTS. THE APPELLANT BY DRAWING ATTENTION OF THE HON'BLE TRIBUNAL TO THE DE CISION OF SUPREME COURT IN THE CASE OF SHEOPAT RAI DEALING WITH A LEGISLATION OF UP GOV T., DEMONSTRATED THAT THE APEX COURT HELD THAT SUCH CHARGE IS NOTHING BUT A CONSIDERATIO N FALLING UNDER ENTRY 8 OF LIST II OF CONSTITUTION WHICH IS WITHIN EXCLUSIVE DOMAIN OF TH E STATE. THEREFORE THE ACTION OF THE STATE IN MAKING SUCH LEGISLATION IS NOT QUESTIONABL E IN ANY MANNER.~ 5. IN A RECENT DECISION, HON'BLE MUMBAI TRIBUNAL IN THE CASE OF CITY & INDUSTRIAL CORPORATION OF MAHARASHTRA LTD. VS. ACIT (90 DTR 40 6) WHILE DEALING WITH A SIMILAR ISSUE HELD AS FOLLOWS: 'INCOME- CHARGEABILITY- IMMUNITY UNDER ARTICLE 289 VIS-II-VIS STATE GOVERNMENT UNDERTAKING- ASSESSEE IS A COMPANY, WHOLLY OWNED BY THE GOVERNMENT OF MAHARASHTRA ENGAGED IN CONSTRUCTION OF RESIDENTIAL AND COMMERCIAL STRUCTURES AS WELL AS DEVELOPMENT OF INFRASTRUCTURES AND TOWNS - ALL FINANCIAL DEALINGS HAVE TO BE ROUTED THROUGH AUTHORIZATIONS BY THE GOVERNMENT- ACTIVITY SO PERFORMED BY THE ASSESSEE IS NOTHING BUT AN ACT OF STATE WITHOUT ANY PROFIT OR COMMERCIAL MOTIVE ATTACHED WITH IT IN TERMS OF SS.113 AND 113A OF MR& TP ACT READ WITH ART.289(1) AND 289(3) OF CONSTITUTION OF INDIA- ASS ESSEE COMPANY IS AN AGENT AND THAT IT WAS PERFORMING THE FUNCTIONS OF THE GOV ERNMENT- ASSESSEE'S INCOME WAS NOT THEREFORE CHARGEABLE TO TAX. ' THE APPELLANT SUBMIT THAT THE FACTS OF THE APPELLAN T'S CASE IS SIMILCLR IN VIEW OF ACTING AS AN AUTHORITY ON BEHALF OF STATE AS PER PR OVISIONS OF SEC.68 A OF EXCISE ACT AND THE INCOME DERIVED BY SUCH AN ACTIVITY HAS TO NATURALLY BELONG TO THE STATE TO ENJOY IMMUNITY UNDER ARTICLE 289 OF CONSTI TUTION. 6. THE APPELLANT HAS ALREADY DRAWN ATTENTION OF THE HON'BLE TRIBUNAL TO THE GO NO.614 AS PER WHICH REMITTANCES ARE MADE TO PD A/C. BY DRA WING FURTHER ATTENTION OF THE HONOURABLE I.T.A.T., TO THE PROVISIONS OF ARTICLE 2 84 AND 283 OF CONSTITUTION IT WAS SUBMITTED THAT AS PER THESE ARTICLES THE AMOUNTS RE MITTED INTO PD ALC BELONG TO THE STATE AND ONLY STATE HAS POWER TO DEAL WITH SUCH FUNDS. T HIS DEMONSTRATES THAT THE STATE IS RIGHT IN DECLARIN,9 THAT THE AMOUNTS PAID IN ACCORD ANCE WITH THE THEN EXISTING PROVISIONS OF SEC.23A READ WITH GO MS.614 BELONG TO IT. THIS D OES NOT INTERFERE WITH THE PROVISIONS OF SECA OF I.T.ACT. THE APPELLANT FURTHER SUBMITS T HAT THE ABOVE REFERRED ENACTMENT OF THE STATE HAS ONLY DECLARED THE RECEIPT IN ITS HAND S AS ITS INCOME. WHETHER SUCH 32 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. PAYMENTS BY THE APPELLANT ARE ALLOWABLE OR NOT WHIL E COMPUTING INCOME IS TO BE DETERMINED BY THE ASSESSING OFFICER BEFORE INVOKING PROVISIONS OF SEC.4 OF THE I.T.ACT. THE STATE LEGISLATION NOWHERE MEDDLED WITH THE TAXI NG PROVISIONS OF THE I.T.ACT TO PREVENT THE AO FROM CONSIDERING THE PAYMENTS UNDER INCOME-TAX PROVISIONS. THE APPELLANT THEREFORE SUBMITS THAT THERE IS NO REPUGN ANCY EVEN AFTER CONSIDERING THE PROVISIONS OF SECTION 4 OF THE IT ACT. 7. THE APPELLANT WITH REGARD TO APPLICATION OF INCO ME, BESIDES WHAT IS SUBMITTED ALREADY, SUBMITS FURTHER THAT, TO CONSIDER A PAYMEN T TO BE APPLICATION OF INCOME, BESIDES DECIDING WHETHER THE INCOME IS EARNED BY THE APPELL ANT ON ITS OWN, SHOULD ALSO EXAMINE WHETHER SUCH PAYMENT IS OF THAT NATURE THAT IT IS N OT REQUIRED TO BE PAID OTHERWISE. ONLY IN SUCH CIRCUMSTANCES, WHERE CERTAIN AMOUNT IS PAID WITHOUT ANY REQUIREMENT THEN IT COULD BE HELD AS APPLICATION OF INCOME. THE APPELLA NT ALSO INVITE ATTENTION OF THE HONOURABLE I.T.A.T., TO THE DECISION OF DELHI HIGH COURT IN THE CASE OF D.T.T.D.C.LTD., REPORTED IN 350 ITR 1 WHEREIN THE DELHI GOVERNMENT VESTED THE RIGHT TO SALE IN RETAIL THE COUNTRY LIQUOR AND SOME OTHER INTOXICANT AND DIRECT ED THE COMPANY TO CONSTRUCT FLY OVERS AND PEDESTRIAN FACILITIES, AFTER RETAINING 5 PAISE PER BOTTLE AND TO USE REMAINING SUM ON CONSTRUCTIONS. IN THAT CASE THE ASSESSING OF FICER HAS NOT ALLOWED THE AMOUNT SPENT BY THE COMPANY AS DEDUCTION ON THE GROUND THA T IT IS CAPITAL EXPENDITURE. THE HIGH COURT ULTIMATELY HELD THEM TO BE REVENUE EXPEN DITURE. IMPORTANT OBSERVATIONS OF THE HONOURABLE HIGH COURT IS THAT MERE REALIZATION OF AMOUNT DURING TRADING IS NOT DETERMINATIVE AS TO WHETHER IT THE AMOUNT RECEIVED IS INCOME. THIS DEMONSTRATES THAT THE VIEW OF THE AO CONFIRMED BY THE LEARNED CITCA) THAT AMOUNTS RECEIVED BY THE APPELLANT IS ITS INCOME BEFORE REMITTING THEM TO TH E STATE IS INCORRECT. THIS SUBMISSION IS WITHOUT PREJUDICE TO THE FACT THAT THE APPELLANT NE VER RECEIVED SUCH SUMS AND WERE PAID DIRECTLY TO THE STATE P.D.A/C. 8. THE APPELLANT ALREADY DREW ATTENTION TO THE THEN EXISTING PROVISIONS OF SEC.23A OF EXCISE ACT AND ALSO THE AMENDED PROVISION SECAC BRO UGHT IN RETROSPECTIVELY. THE WORDINGS ARE SO CLEAR THAT IN LIEU OF CONFERRING RI GHT OF WHOLE SALE TRADE, THE APPELLANT IS TO PAY ALL THE MARGINS IN THE FORM OF PRIVILEGE FEE ETC., TO THE STATE. THEREFORE IN THE LIGHT OF SUCH WORDINGS THE ASSESSING OFFICER IS REQUIRED TO GIVE A FINDING AS TO WHY IT IS NOT A PAYMENT REQUIRED TO BE MADE AND THEN CAN HOLD IT TO BE APPLICATION OF INCOME. ONE SUCH REASON THE DEPARTMENT SOUGHT TO STATE IS THAT THE PAYMENT IS NOT A FIXED ONE AND HENCE IT IS APPLICATION OF INCOME. THE APPELLANT AL READY MADE SUBMISSIONS AS TO HOW IT IS FIXED ONE. WITHOUT PREJUDICE TO THE SUBMISSION T HAT THE PAYMENT IS UNDOUBTEDLY A FIXED ONE, THE APPELLANT SUBMITS THAT FIXED PAYMENT IS REQUIRED ONLY WHERE IT IS A FEE, TAX ETC., AND NOT TO A CONSIDERATION CHARGED BY THE STA TE. THE DEPARTMENT TO HOLD THAT IT SHOULD BE FIXED RELIED ON THE DECISION OF SUPREME C OURT IN THE CASE OF GOVIND SARAN AND GANGA SARAN. THIS DECISION HAS NO APPLICATION S INCE THE PAYMENT IS ONLY A CONSIDERATION AND NOT FEE OR TAX, AS HELD BY CONSTI TUTIONAL BENCH OF SUPREME COURT THAT ARE REFERRED TO IN THE CASE OF SHEOPAT RAI AND ALSO IN THE DECISION OF MC DOWELS WHICH ARE ALREADY REFERRED TO IN THE SUBMISSIONS ALREADY MADE. THE APPELLANT THEREFORE SUBMITS THAT THE STAND OF THE LEARNED CIT(A) THAT I T IS APPLICATION OF INCOME IS INCORRECT. 33 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 9. THE APPELLANT HEREUNDER SUMMARIZES THE SUBMISSIO NS THAT ARE MADE AS UNDER: 1. THE APPELLANT NEVER HAD ANY RIGHT TO CARRYON BUS INESS IN INTOXICANTS BUT HAS CARRIED ON SUCH BUSINESS BY VIRTUE OF 1993 ACT EXPLANATION, WHICH CONFERRED THE RIGHT TO ACT AS AN AUTHORITY ON BEHALF OF THE STATE FOR THE PURPOSE S OF SEC.68 A OF EXCISE ACT 68 AND AS SUCH THE INCOME FROM SUCH BUSINESS BELONG TO THE ST ATE. 2. THE APPELLANT NEVER RECEIVED ANY AMOUNT AND THAT ENTIRE SALE PROCEEDS ARE REMITTED TO STATE PD ALC HELD BY DIRECTOR DISTILLERIES AS PE R GO MS.NO.614. AS PER ARTICLE 284 OF CONSTITUTION, THE PROCEEDS BELONG TO STATE. AS PER ARTICLE 283 OF CONSTITUTION FROM SUCH PROCEEDS, THE DIRECTOR RYLAKES PAYMENT FOR PURCHASE S, MAKES PAYMENT TOWARDS PRIVILEGE FEE, 'ETC., PROVIDES FOR REIMBURSEMENT OF EXPENSES DRAWN FROM AN AD ALC OPENE'D FOR THAT PURPOSES. AS SUCH THE QUESTION OF MAKING PROVISION FOR INCOME-TAX OR WORKING OUT AT THE END OF THE DAY AMOUNT PAYABLE TO STATE NEVER AROSE AND SUCH OBSERVATIONS OF THE LEARNED CIT(A) IS CONTRARY TO F ACTS. 3. THE ENACTMENT THAT IS BROUGHT OUT TO 1993 ACT OR EVEN THE PROVISIONS OF SEC.23 A OF EXCISE ACT '68 ARE ENACTED AS PER ENTRY 8 OF LIST I I OF CONSTITUTION WHICH IS HELD TO BE WITHIN EXCLUSIVE DOMAIN OF THE STATE TO THE EXCLUSI ON OF CENTRAL GOVERNMENT AND THE PUBLIC AND THEREFORE IS NEITHER REPUGNANT TO PROVIS IONS OF INCOME-TAX ACT OR THE PROVISIONS OF SEC.4C IS A VALID PROVISION THOUGH IT IS RETROSPECTIVE IN VIEW OF RIGHT CONFERRED BY CONSTITUTION OF INDIA AS ALREADY REFER RED TO DURING SUBMISSIONS AND SUPPORTED BY THE DECISION IN THE CASE OF HMT LTD. 4. THE LEVIES MADE EITHER UNDER THE THEN EXISTING P ROVISIONS OF SEC.23A OR THE AMENDED PROVISIONS OF SEC. 4C READ WITH SECAB ARE NOT FEE O R TAX BUT ARE CONSIDERATION FOR CONFERRING THE RIGHT TO CARRYON THE BUSINESS AS HEL D BY THE SUPREME COURT IN THE CASE OF SHEOPAT RAI, AND HENCE THEY RIGHTFULLY BELONG TO TH E STATE AND ARE ALLOWING BUSINESS EXPENDITURE. 5. THE OBSERVATIONS OF SUPREME COURT IN THE CASE OF APSRTC AT PARA 15 WHOSE EXTRACT IS ALREADY SUBMITTED APPLIES SQUARELY TO THE APPELL ANT'S CASE SINCE THE LEVY COLLECTED U/S.23A IS HELD TO BE UNDER ENTRY 8 OF LIST II OF C ONSTITUTION AND WHICH IS INCOME OF THE STATE AND IF SUCH LEVY IS EXCLUDED THERE IS NO INCO ME. 6. AS 22 HAS NO APPLICATION AND EVEN ASSUMING THAT IT APPLIES SINCE THERE WILL BE NO INCOME ONCE INCOME IS COMPUTED UNDER INCOME-TAX ACT AS REQUIRED UNDER AS 22 THERE IS NO NECESSITY TO MAKE PROVISION FOR INCOME TAX AC T. 7. THE DECISIONS IN THE CASE OF A.P.STATE CIVIL SUP PLIES CORPORATION, APSRTC OR THE A.P.HOUSING BOARD HAS NO APPLICATION SINCE IN THOSE CASES THE CLAIM IS NOT WITH REGARD TO PAYMENTS MADE TO STATE AND FURTHER IN THOSE CASE S THE COLLECTIONS NEVER WENT INTO GOVERNMENT ACCOUNT BUT HAS GONE INTO THE ACCOUNTS O F THE RESPECTIVE ASSESSEE'S AND LASTLY THE TRADE OR BUSINESS CARRIED ON BY THEM IS NOT WITHIN EXCLUSIVE RIGHT OF THE STATE 34 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. AS IN THE APPELLANT'S CASE. IN THOSE CASES THE DECI SION IS NOT THAT PAYMENT TO STATE IS NOT ALLOWABLE AS EXPENDITURE AS IN THE CASE OF THE APPE LLANT. 8. THE AMOUNTS PAID TO STATE IS AS PER STATUTE AND CONSTITUTIONAL RIGHT OF THE STATE AND WITHOUT SUCH PAYMENT THE APPELLANT COULD NOT HAVE C ARRIED ON THE BUSINESS AND HENCE IT IS ALLOWABLE AS BUSINESS EXPENDITURE. 16. THE LEARNED DR SUPPORTING THE CONCLUSION DRAWN BY THE REVENUE AUTHORITIES SUBMITTED THAT THE CIT (A) HA D DEALT WITH ALL THE CONTENTIONS OF THE ASSESSEE AND ALSO TAKEN INTO CONSIDERATION THE AMENDMENTS MADE TO THE EXCISE ACT. IT WAS SUBM ITTED THAT AFTER EXAMINING THE AMENDED PROVISIONS OF SECTION 4 C, THE CIT (A) HAD MADE A CLEAR DISTINCTION BETWEEN THE NATURE OF PAYMENT IN THE HANDS OF THE STATE GOVERNMENT AND IN NATURE OF PAYM ENT IN THE HANDS OF THE ASSESSEE. THOUGH SECTION 4C OF THE EXCISE ACT STATES THAT PAYMENT MADE BY THE CORPORATION TO THE STATE I S INCOME OF THE STATE BUT THAT AUTOMATICALLY CANNOT MEAN THAT INCOM E OF CORPORATION IS INCOME OF STATE. FURTHER, THE MANNER/MODE OF CO MPUTATION OF PRIVILEGE FEE ETC., CLEARLY SHOW THAT IT IS IN THE NATURE OF COMPUTING NET INCOME OR PROFIT WHICH IS TO BE PASSED ON TO TH E STATE. THEREFORE, THE PRIVILEGE FEE IN CASE OF THE ASSESSE E IS BALANCING CHARGE ON THE P & L ACCOUNT, THE INTENTION OF THE S TATE IS TO APPROPRIATE 100% OF PROFIT, BUT SUCH PROFIT CAN BE ARRIVED ONLY AFTER MEETING THE EXPENDITURE WHICH INCLUDES INCOME-TAX. IN THIS CONTEXT, HE REFERRED TO AS-22 ISSUED BY THE ICAI. IT WAS S UBMITTED THAT A STATE LEGISLATION WHICH CONFERS INCOME-TAX EXEMPTIO N OR EXCLUDES INCOME OF A CORPORATION FROM CHARGEABILITY TO INCOM E-TAX RUNS CONTRARY TO THE CHARGING SECTION 4 OF THE INCOME-TA X ACT AND WOULD THEREFORE BE CONTRARY TO ARTICLE 254 OF THE CONSTI TUTION OF INDIA, BECAUSE THEN THE STATE IS IN DANGER OF CONTRADICTIN G OR ENACTING A LEGISLATION WHICH IS IN CONFLICT WITH THE POWERS OF THE UNION AS 35 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. INCOME-TAX IS IN THE UNION LIST. REBUTTING THE AS SESSEES CONTENTION THAT IT IS AN AGENT OF THE STATE AND ALSO DIVERSION OF INCOME BEFORE IT REACHES THE ASSESSEE AS PER ITS GO NO.614, THE L EARNED DR SUBMITTED THAT THE POWER TO LEGISLATE ON A SUBJEC T IN SEVENTH SCHEDULE LIST I OF CONSTITUTION IS DIFFERENT FROM CLAIMING THAT INCOME DERIVED FROM AN ACTIVITY CARRIED OUT IN RESPECT OF A SUBJECT IN THIS SCHEDULE IS EXEMPT FROM INCOME-TAX. THUS, WHILE T HE AMENDMENTS AND STATEMENT OF OBJECTS AND REASONS OF THE EXCISE ACT SPECIFY WHAT COMES TO THE GOVERNMENT OF A.P, IT CAN NEVER BE INT ERPRETED TO MEAN THAT THESE RECEIPTS FLOWING TO THE GOVERNMENT OF A.P BY WHATEVER NAME CALLED ARE EXEMPT FROM INCOME-TAX. W HILE A PERSON CAN DEFINE WHAT ITS INCOME IS BUT HAS NO AUTHORITY TO IMPLY THAT THIS INCOME IS ALSO EXEMPT FROM INCOME-TAX. EXCLUSION F ROM THE PURVIEW OF THE INCOME-TAX IS GOVERNED EITHER BY CONSTITUTIO N ITSELF OR BY THE INCOME-TAX ACT ITSELF. THE LEARNED DR SUBMITTED T HAT THE INCOME OF THE STATE AND THE INCOME OF ASSESSEE CORPORATION IS ALWAYS DISTINCT WHICH CAN ALSO BE SEEN FROM THE FACT THAT THE ASSES SEE CORPORATION ACTUALLY PAYS SALES TAX TO THE STATE. THEREFORE, T HE ASSESSEE IS MERELY ACTING AS A SELLER OF THE IMFL. THE LEANED DR SUBMITTED THAT THE FACT THAT THE ASSESSEE DEPOSITS ALL ITS SALE RE CEIPTS INTO PD ACCOUNT BY ITSELF WOULD NOT MAKE SUCH INCOME, INCOM E OF STATE. THE CORPORATION AS WELL AS THE GOVERNMENT SHOW THIS AMOUNT IN THEIR ACCOUNT AS DEPOSIT. A DEPOSIT BY DEFINITION IS SOMETHING WHICH IS REFUNDABLE. THUS, WHEN A CORPORATION CRED ITS THE AMOUNT INTO GOVERNMENT PD ACCOUNT AND SHOWS THEM AS DEPOSI T AND THE GOVERNMENT ALSO CLASSIFIES IT AS A PUBLIC DEPOSIT M ADE WITH IT, A DISTINCTION IS DRAWN AS REGARDS THE OWNERSHIP OF SU CH AMOUNTS. HENCE, THE MERE FACT THAT AMOUNT IS DEPOSITED IN PD ACCOUNT OR THAT THE DIRECTOR OF BREWERIES DETERMINES THE PRIVILEGE FEE ETC., DO NOT 36 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. MATERIALLY CHANGE THE POSITION THAT IT IS THE INCOM E OF THE CORPORATION DERIVED FROM SALES MADE BY IT. IN THIS CONTEXT, THE LD. DR REFERRED TO THE DECISION OF INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH IN CASE OF AP HOUSING BOARD IN ITA NO. .. DATED 31-5-2013. 17. THE LEARNED DR SUBMITTED THAT SO FAR AS THE AS SESSEES CLAIM THAT THE INCOME FROM SALE OF IMFL IS NOT TAXABLE A S PER ARTICLE 289 OF THE CONSTITUTION, THE SAME IS NOT TENABLE BECAU SE THE CONDITIONS SET OUT IN ARTICLE 289, CLAUSES 1,2, AND 3 HAVE NO T BEEN SATISFIED. FOR THIS CONTENTION, THE LEARNED DR AGAIN REFERRED TO THE DECISION OF INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH IN C ASE OF APHB (SUPRA). THE LEARNED DR SUBMITTED THAT THE NEW PRO VISIONS BROUGHT TO THE EXCISE ACT NOWHERE PRESCRIBE HOW AND ON WHAT BASIS PRIVILEGE FEE IS TO BE DETERMINED. THAT IS WHY ONE HAS TO GO BACK TO SECTION 23A OF THE EXCISE ACT TO INFER THAT THIS IS COMPU TED AS A BALANCING FIGURE. IT WAS SUBMITTED THAT UNLIKE CORPORATIONS IN OTHER STATES WHICH HAS SPECIFIED THE LEVY OF SUCH FEE AS A FIXED AMOUNT UNDER THE RULES OR A SPECIFIC AMOUNT BASED ON THE STOCK QUANT ITY AND REFLECTED IN TERMS OF RUPEE PER LITRE, THERE IS NO SPECIFIC NAME OR BASIS FOR LEVY OF SUCH FEE. THE LEARNED DR SUBMITTED THAT CO MPUTATION ITSELF SHOWS THAT THE PRIVILEGE FEE ETC., IS CALCULATED AS A REMAINDER I.E. REVENUE LESS EXPENSES. THE LEARNED DR SUBMITTED THA T CONSIDERING ALL THESE ASPECTS, THE CIT (A) WAS JUSTIFIED IN NEG ATING THE ASSESSEES CLAIM THAT IT WAS ACTING ON BEHALF OF ST ATE HENCE THE INCOME FROM SALE OF LIQUOR IS THE INCOME OF THE STA TE. IT WAS SUBMITTED THAT THE CIT (A) THEREFORE CORRECTLY APPL IED THE RATIO DECIDED BY THE HONBLE AP HIGH COURT IN CASE OF AP STATE CIVIL SUPPLIES CORPORATION AND BY THE HONBLE SUPREME COU RT IN CASE OF 37 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. APSRTC. SO FAR AS THE CONTENTION THAT THE CIT HA S DROPPED THE PROCEEDINGS INITIATED UNDER 263 OF THE ACT ON IDENT ICAL ISSUE, THE LEARNED DR SUBMITTED THAT THE PRINCIPLES OF RES JUD ICATA WILL NOT APPLY TO INCOME-TAX PROCEEDINGS. THE LEARNED DR SU BMITTED THAT THE DECISIONS ON WHICH THE ASSESSEE RELIED UPON ARE FACTUALLY DISTINGUISHABLE HENCE, WOULD NOT APPLY TO THE FACTS OF THE INSTANT CASE. 18. WE HAVE HEARD THE PARTIES AND TAKEN NOTE OF WRITTEN SUBMISSIONS, ADDITIONAL WRITTEN SUBMISSIONS, COUNTERS, REJOINDER FILED BY BOTH THE SIDES BEFORE US. WE HAVE ALSO PAINSTAKINGLY GONE THROUGH ALL THE MATERIALS PLACED ON RECORD INCLUDING THE ORDERS PASSED BY THE REVENU E AUTHORITIES. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECISIONS RE LIED UPON BY THE PARTIES. FROM CONTENTIONS RAISED BY THE LEARNED AR, IT IS TO BE NOTED THAT THE ASSESSEES CLAIM THAT THE PRIVILEGE FEE PAID TO THE GOVERNMENT OF A.P. UNDER THE PROVISIONS OF EXCISE ACT IS NOT TAXABLE IS BROA DLY BASED ON THE FOLLOWING GROUNDS;- I) AS PER THE AMENDED PROVISIONS OF EXCISE ACT THE PAYMENT OF MARGINS IN THE FORM OF PRIVILEGE FEE ETC., IS THE I NCOME OF THE STATE, HENCE IMMUNE FROM TAXATION AS PER ARTICLE 28 9 OF THE CONSTITUTION OF INDIA. II) STATE HAS THE EXCLUSIVE RIGHT TO CARRY ON TRADE IN WHOLESALE LIQUOR. WHEN THE STATE HAS PARTED ITS EXCLUSIVE RI GHT TO THE CORPORATION, AN AUTHORITY ACTING ON BEHALF OF THE S TATE, IT HAS EVERY RIGHT TO COLLECT THE ENTIRE PROFITS AS A CONS IDERATION FOR CONFERRING SUCH PRIVILEGE. 38 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. III) THE STATE IS COMPETENT TO ENACT THE PROVISIONS OF SEC. 4A, 4B,4C OF THE EXCISE ACT UNDER ENTRY 8 LIST II OF SEVENTH SCHEDULE TO THE CONSTITUTION OF INDIA. IV) THE INCOME-TAX DEPARTMENT IS ALLOWING SUCH PAYM ENT TO STATE AS DEDUCTION IN CASE OF ALL CORPORATIONS OF OTHER STAT ES, HENCE NO DIFFERENTIAL TREATMENT SHOULD BE MADE IN CASE OF AS SESSEE. THEREFORE, THE PAYMENT MADE TO THE STATE SHOULD BE ALLOWED AS EXPENDITURE. V) AS PER GOM 614, THE DIRECTOR, DISTILLERIES SHALL PAY FOR THE EXPENSES OF THE CORPORATION FROM OUT OF THE SALE PR OCEEDS DEPOSITED IN PD A/C. THEREFORE, AS PER ARTICLE 283 AND 284 OF THE CONSTITUTION OF INDIA THE DEPOSIT IN PD A/C BELONGS TO THE STATE AND IT IS NOT IN THE NATURE OF REVENUE. THE AMOUNT REMITTED TO PD A/C IS THE ENTIRE SALE PROCEEDS AND NOT THE SURP LUS. VI) THE CIT IN A PROCEEDING INITIATED U/S 263 FOR T HE A.Y 2001-02 ACCEPTING ASSESSEES CONTENTION THAT PAYMENTS MADE TO THE STATE WILL NOT AMOUNT TO APPLICATION OF INCOME HAD DROPPED THE PROCEEDINGS. VII) STATE IS COMPETENT TO MAKE RETROSPECTIVE AMEND MENT. 19. BEFORE DECIDING THE ISSUES RAISED BY THE ASSESS EE IT IS NECESSARY TO DEAL WITH CERTAIN BASIC FACTS WHICH HAVE A CRUCIAL BEARI NG. THE ASSESSEE WAS INCORPORATED UNDER THE COMPANIES ACT, 1956, ON 23-7 -1986. THE OBJECTS OF THE ASSESSEE ARE SET OUT IN ARTICLE III(A) & (B) OF THE MEMORANDUM OF ASSOCIATION. THE MAIN OBJECTS OF THE ASSESSEE AS P ER ARTICLE III(A) ARE AS UNDER:- 39 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 1. TO MANUFACTURE, PURCHASE, IMPORT, EXPORT ALCOHO L AND ALL OTHER BEVERAGES SUITABLE FOR HUMAN CONSUMPTION. 2. TO UNDERTAKE BOTTLING/PACKING OF ALCOHOL AND OTH ER BEVERAGES IN A SUITABLE MANNER. 3. TO CARRY ON BUSINESS AS SELLERS, DEALERS AND DIS TRIBUTORS OF ALCOHOL AND OTHER BEVERAGES EITHER IN BULK OR IN RE TAIL. 4. TO UNDERTAKE THE MANUFACTURE OF ALL MACHINERY AN D EQUIPMENT REQUIRED TO ATTAIN ANY OF THE ABOVE OBJECTS. 5. TO ACT AS STOCKISTS, COMMISSION AGENTS, MANUFACT URERS, REPRESENTATIVES OR AGENTS SELLING AND PURCHASING AG ENTS, DISTRIBUTORS, BROKERS, TRUSTEES, ATTORNEYS IN CONNE CTION WITH ATTAINMENT OF THE MAIN OBJECTS OF THE CORPORATION. 20. ON A READING OF MAIN OBJECTS AND ANCILLARY OBJ ECTS WOULD MAKE IT CLEAR THAT THE ASSESSEE IS A PURELY BUSINESS VENTURE FOR CARRYING ON THE ACTIVITY OF MANUFACTURE, PURCHASE IMPORT, EXPORT OF ALCOHOL AN D OTHER BEVERAGES AS SELLERS, DEALERS AND DISTRIBUTORS EITHER IN BULK O R IN RETAIL. ARTICLES OF ASSOCIATION OF THE ASSESSEE CORPORATION MENTIONS IT AS A PRIVATE COMPANY WITHIN THE MEANING OF SEC. 3(1)(III) OF THE COMPANI ES ACT AND FURTHER SAYS THAT THE REGULATIONS CONTAINED IN TABLE A OF THE FI RST SCHEDULE TO THE COMPANIES ACT, 1956 IN SO FAR AS THEY ARE APPLICABL E TO A PRIVATE COMPANY SHALL APPLY TO ASSESSEE TO THE EXTENT THEY ARE NOT EXPRESSLY OR IMPLIEDLY EXCLUDED BY THE ARTICLES OF ASSOCIATION. THE ARTIC LE OF ASSOCIATION FURTHER PROVIDES THAT THE BOARD OF DIRECTORS SHALL MANAGE T HE AFFAIRS OF THE COMPANY. FROM THE MEMORANDUM AND ARTICLE OF ASSOCI ATION THEREFORE IT BECOMES CLEAR THAT THE ASSESSEE IS LIKE ANY OTHER C ORPORATION WHOSE SHARES ARE HELD BY THE GOVT. FROM THE PROFIT AND LOSS ACC OUNT FILED ALONG WITH THE RETURN, A COPY OF WHICH IS AT PAGE 5 OF THE PAPER B OOK, IT APPEARS THAT 40 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. THOUGHT THE ASSESSEE HAS TREATED THE SALE TURNOVER OF IMFL AMOUNTING TO RS.8346.60 CRORES AS ITS INCOME BUT AT THE SAME TIM E IT HAS CLAIMED EXPENDITURE THERE FROM THE PURCHASE PRICE OF IMFL, SALARIES & WAGES AND MANUFACTURING AND ADMINISTRATIVE EXPENSES, CONTRIBU TION TO CHIEF MINISTERS RELIEF FUND, PRIVILEGE FEE TO GOVERNMENT, SALES-TAX , INTEREST AND DEPRECIATION. THE ASSESSING OFFICER HAS ACCEPTED A LL OTHER EXPENDITURES CLAIMED EXCEPT THE PRIVILEGE FEE OF RS.1415.28 CROR ES. THE REASONING OF THE ASSESSING OFFICER IN DISALLOWING THE AFORESAID EXPE NDITURE WHICH HAS ALSO BEEN CONFIRMED BY THE CIT (A) IS, IT ACTUALLY REPRE SENTS THE PROFIT OF THE ASSESSEE, AND HENCE AT BEST IT CAN BE AN APPLICATIO N OF INCOME ON THE PART OF THE ASSESSEE. THE ASSESSING OFFICER REFERRING TO T HE PROVISIONS OF COMPANIES ACT, AS-22 AND SEC.23A OF THE EXCISE ACT HAS SAID T HAT THE ASSESSEE HAS TO FIRST COMPUTE ITS PROFIT IN TERMS WITH THE COMPANIE S ACT AND AS-22 AFTER TAKING INTO ACCOUNT EXPENDITURE AND INCOME TAX PAYA BLE AND THEREAFTER THE SPECIAL PRIVILEGE FEE ETC. TO BE PAID TO THE COMMIS SIONER OF PROHIBITION AND EXCISE. THE CIT (A) AFTER CONSIDERING THE AMENDED PROVISIONS OF SECTIONS 4A, 4B AND 4C OF THE AP (REGULATION OF TRADE IN IMFL, F OREIGN LIQUOR) ACT, 1993 HELD THAT SEC. 4A HAS NOT SPECIFIED ANY AMOUNT. TH E AMOUNT PAID IS ALSO NOT COLLECTED FROM THE SELLERS OF IMFL WHICH WOULD BE E VIDENT FROM THE INVOICES. THE AMOUNTS WERE PAID OUT OF THE FUNDS OF THE ASSES SEE REALISED FROM ITS SALES AND AS PER ITS OWN CALCULATION. SIMILARLY, T HOUGH SECTION 4B PROVIDES FOR REMITTING TO THE GOVERNMENT IN THE MANNER SPECI FIED BY THE GOVERNMENT. HOWEVER, IT HAS NOT PROVIDED THE MANNER OF COMPUTATION. THEREFORE, COMPUTATION STILL NEEDS TO BE MADE U/S 2 3A OF THE STATE EXCISE ACT WHICH SPECIFIES THAT THE MARGINS AFTER MEETING EXPENDITURE SHALL BE PAID AS PRIVILEGE FEES. THE CIT (A) THEREFORE HELD THAT THE DEPARTMENTS STAND THAT INCOME TAX IS AN EXPENSE AS PER AS-22 AND IN C OMMERCIAL SENSE REMAINS UNASSAILED. THE CIT (A) FURTHER HELD THAT SECTION 4C OF THE STATE EXCISE ACT ONLY REAFFIRMS THE FACT THAT IT IS ONLY THE PROFIT THAT IS SOUGHT TO BE APPROPRIATED. 41 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 21. IN THE AFORESAID CONTEXT, THE ONLY ISSUE WHICH ARISES FOR CONSIDERATION IS WHETHER SPECIAL PRIVILEGE PAID TO THE GOVERNMENT CAN BE ALLOWED AS EXPENDITURE. IT IS CONTENTION OF THE ASSESSEE THAT STATE GOVERNMENT HAS THE EXCLUSIVE PRIVILEGE OF SALE, DISTRIBUTION IN IMFL. THE STATE HAS APPOINTED THE ASSESSEE CORPORATION TO ACT AS AN AUTHORITY ON BEHA LF OF THE STATE BY VESTING SUCH EXCLUSIVE PRIVILEGE. THEREFORE, THE ASSESSEE HAVING ACTED AS AN AUTHORITY ON BEHALF OF THE STATE OR AS AN AGENT OF THE STATE AS PER SEC. 68A OF THE STATE EXCISE ACT, THE INCOME FORMS ALE OF IMFL IS THE INCOME OF THE STATE, HENCE, CANNOT BE SUBJECTED TO INCOME-TAX IN VIEW OF RESTRICTIONS IMPOSED UNDER ARTICLE 289(1) OF THE CONSTITUTION OF INDIA. IT IS ALSO THE CLAIM OF THE ASSESSEE THAT PRIVILEGE FEE IS NOTHING BUT A CONSID ERATION PAID TO THE GOVERNMENT FOR CONFERRING A RIGHT. IN THIS CONTEXT , LET US EXAMINE SOME OF THE RELEVANT PROVISIONS UNDER THE STATE EXCISE LAW. SEC. 23 OF EXCISE ACT PROVIDES THAT INSTEAD OF ANY EXCISE DUTY OR FEES LE VIABLE THE GOVERNMENT WILL PRESCRIBE PRIVILEGE FEE FOR GRANT OF EXCLUSIVE PRIV ILEGE IN RESPECT OF LIQUOR OR ANY OTHER INTOXICANT. SECTION 23A OF THE EXCISE AC T PROVIDED THAT IN CONSIDERATION OF THE PRIVILEGE CONFERRED ON THE ASS ESSEE CORPORATION IN TERMS OF ANDHRA PRADESH REGULATION OF TRADE IN INDI AN MADE FOREIGN LIQUOR, FOREIGN LIQUOR) ACT, 1993, THE ENTIRE MARGINS, SPEC IAL PRIVILEGE FEE, ANY OTHER RECEIPTS AND ANY OTHER AMOUNT REALISED BY THE CORPO RATION FROM WHATEVER SOURCE AFTER DEDUCTING EXPENSES INCURRED BY THE COR PORATION, SHALL BE PAID AS PRIVILEGE FEE OR SPECIAL PRIVILEGE TO THE GOVERN MENT. SECTION 23B OF THE ACT PROVIDED THAT ALL AMOUNTS PAID BY THE CORPORATI ON FROM 21-7-1993 TO THE COMMISSIONER OF PROHIBITION AND EXCISE AS PRIVILEGE FEE ETC. IN CONSIDERATION OF THE PRIVILEGE CONFERRED SHALL B E DEEMED TO BE THE DUE PAYMENT FOR THE RELEVANT YEAR U/S 23 AND 23A. SEC. 23 AND 23A BROUGHT TO THE EXCISE ACT TO THE STATUTE IN THE YEAR 2006 WITH RETROSPECTIVE EFFECT FROM 21-7-1993 HOWEVER WERE OMITTED BY VIRTUE OF AN AMEN DMENT MADE IN THE YEAR 2012. IN THE SAID AMENDING ACT OF 2012, THREE NEW SECTIONS I.E., SEC. 4A, 4B AND 4C WERE BROUGHT TO THE STATUTE WITH RETR OSPECTIVE EFFECT FROM 42 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 21-7-1993. SECTION 4A MENTIONS THAT THE GOVERNMENT SHALL SPECIFY THE TRADE MARGIN, PRIVILEGE FEE ETC., TO BE COLLECTED B Y THE ASSESSEE CORPORATION SEC. 4B SPEAKS OF THE AMOUNT BEING REALISED U/S 4A BEING THE INCOME OF THE GOVERNMENT TO BE REMITTED TO THE GOVERNMENT IN THE MANNER SPECIFIED BY THE GOVERNMENT. SECTION 4C PROVIDES THAT AMOUNTS P AID BY THE CORPORATION FROM 21-7-1993 TO THE COMMISSIONER PROHIBITION OR G OVERNMENT AS PRIVILEGE FEE, SPECIAL PRIVILEGE FEE ETC., IN CONSIDERATION O F THE PRIVILEGE CONFERRED ON THE CORPORATION AS PER THE PROVISION OF SECTIONS 23 (1), 23A AND 23B OF EXCISE ACT SHALL BE DEEMED TO BE THE INCOME OF THE GOVERNM ENT. THOUGH THE ASSESSEE HAS CLAIMED THAT THE GOVERNMENT FIXES THE SALE PRICE BUT THE FACT IS PRIVILEGE FEE,SPECIAL PRIVILEGE FEE ETC., HAVE NOT BEEN SPECIFIED BY THE GOVERNMENT IN TERMS OF SEC. 23A OF THE EXCISE ACT OR AS PER AMENDED SEC. 4A OF THE ACT. THIS IS VERY MUCH EVIDENT FROM THE INVOICES RAISED BY THE ASSESSEE WHICH DID NOT SPECIFY THE DETAILS OF PRICE CHARGED. IN OTHER WORDS, THE INVOICE DID NOT SPECIFY THE PRIVILEGE FEE, SPEC IAL PRIVILEGE FEE ETC.., SEPARATELY THOUGH BOTH SECTIONS 23A AND 4A PROVIDE FOR SPECIFYING SUCH FEE. SECTION 23A OF THE ACT WHICH WAS THE PROVISION PROV IDING FOR PAYMENT OF MARGIN, PRIVILEGE FEE ETC., AND WHICH WAS GOVERNIN G THE FIELD AT THE RELEVANT TIME CLEARLY MENTIONS OF REMITTING SUCH AMOUNT TO THE GOVT. AFTER DEDUCTING THE EXPENSES INCURRED BY THE CORPORATION. AS PER AS-22, A COPY OF WHICH IS AT PAGE 60 OF THE PAPER BOOK, INCOME TAX I S TO BE CONSIDERED AS AN EXPENSE INCURRED IN EARNING INCOME. THE ASSESSEE B EING A COMPANY AND HAVING RECOGNISED THAT THE PROVISIONS OF COMPANIES ACT, 1956 AS APPLICABLE TO PRIVATE COMPANIES WILL BE APPLICABLE TO IT, THE P & L ACCOUNT BALANCE SHEET ETC., HAS TO BE DRAWN UP AS PER THE PROVISIONS OF T HE COMPANIES ACT, 1956 AS WELL AS GUIDELINES OF THE ICAI IN ACCOUNTING STANDA RDS. THEREFORE, IT WOULD BE LOGICAL TO CONCLUDE THAT THE ASSESSEE SHOULD HAV E REMITTED ITS MARGIN, PRIVILEGE FEE ETC., AFTER DEDUCTING EXPENSES WHICH ALSO INCLUDED INCOME TAX. FURTHERMORE, WHEN NO MECHANISM HAS BEEN PROVIDED FO R COMPUTING THE PRIVILEGE FEE, SPECIAL PRIVILEGE FEE ETC., AND ADMI TTEDLY THE ASSESSEE HAVING 43 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. NOT COLLECTED PRIVILEGE FEE, SPECIAL PRIVILEGE FEE ETC., SEPARATELY IN THE BILLS, THE QUANTIFICATION OF SUCH FEE IS ALSO NOT POSSIBLE . IN THESE CIRCUMSTANCES, IT CANNOT BE CLAIMED AS EXPENDITURE. 22. THE ASSESSEE HAS ALSO CLAIMED THAT AS PER SEC. 4C OF THE EXCISE ACT THE ENTIRE SALE PROCEEDS FROM IMFL IS THE INCOME OF THE GOVERNMENT, HENCE IMMUNE FROM TAXATION UNDER ARTICLE 289(1) OF THE CO NSTITUTION OF INDIA. SUCH CONTENTION OF THE ASSESSEE IS NOT TENABLE IN VIEW O F THE CLEAR PROVISIONS OF STATE EXCISE ACT. AS ALREADY STATED, SECTION 23 OF THE EXCISE ACT EMPOWERS THE GOVERNMENT TO COLLECT PRIVILEGE FEE ETC. SECTIO N 23A READ WITH 4A OF THE ACT PROVIDED THAT TRADE MARGIN, PRIVILEGE FEE ETC T O BE COLLECTED BY THE CORPORATION IS TO BE REMITTED TO THE GOVERNMENT. A S PER SEC. 4C AMOUNTS PAID TO THE GOVERNMENT AS PRIVILEGE FEE, SPECIAL PR IVILEGE FEE ETC., TO BE DEEMED TO HAVE BEEN THE INCOME OF THE GOVERNMENT. FROM THESE FACTS IT IS CLEAR THAT THE ENTIRE SALE PROCEEDS FROM IMFL CANNO T BE THE INCOME OF THE GOVERNMENT. THE COMPUTATION OF PRIVILEGE FEE ETC., AS PROVIDED IN THE WORKING AT PAGE 53 AND 54-59 IS NOT CLEAR HOW AND O N WHAT BASIS SUCH FEE HAVE BEEN WORKED OUT. THE GOM 1168 DATED 11-11-200 9 DOES NOT PROVIDE ANY MECHANISM FOR QUANTIFYING PRIVILEGE FEE ETC. N O MATERIAL HAS BEEN PLACED ON RECORD TO SHOW THAT THE GOVERNMENT HAS PR ESCRIBED MODE AND MANNER OF COMPUTING PRIVILEGE FEE ETC. FURTHERMORE , AS HAS BEEN RIGHTLY POINTED OUT BY THE ASSESSING OFFICER THE ASSESSEE H AS TREATED THE AMOUNT REPRESENTING PAYMENT TO CHIEF MINISTERS RELIEF FUN D AS ITS INCOME AND THEREAFTER HAS CLAIMED DEDUCTION U/S 80G OF THE ACT . THIS ITSELF FALSIFIES THE ASSESSEES CLAIM THAT THE ENTIRE SALE PROCEED FROM IMFL IS THE INCOME OF THE GOVERNMENT. 23. ASSESSEE HAS CONTENDED THAT WHOLESALE DISTRIBUT ION AND SALE OF IMFL UNDERTOOK BY THE ASSESSEE CORPORATION AS AN AUTHORI TY ON BEHALF THE STATE IN TERMS OF EXPLANATION TO SECTION 4 OF THE ANDHRA PRA DESH EXCISE ACT, 1968 READ WITH SECTION 68A OF THE ACT, HENCE THE INCOME FROM SALE OF IMFL IS THE 44 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. INCOME OF THE STATE, THEREFORE NOT TAXABLE AS PER A RTICLE 289(1) OF THE ACT. HOWEVER, AS CAN BE SEEN FROM THE PROFIT AND LOSS AC COUNT FOR THE IMPUGNED ASSESSMENT YEAR, THE ENTIRE SALE TURNOVER FROM IMFL HAS BEEN TREATED BY THE ASSESSEE AS ITS INCOME. SIMILARLY, ON EXAMINATION OF THE SALES-TAX/VAT RETURN , IT IS TO BE NOTED THAT THE ASSESSEE IS NOT ONLY SHOWING THE ENTIRE TURNOVER FROM SALE OF IMFL AS ITS TURNOVER BUT IT I S ALSO COLLECTING SALES- TAX/VAT ON SALES EFFECTED TO THE RETAILERS AND PAYI NG TO THE GOVERNMENT ACCOUNT. ASSESSMENT ORDERS HAVE ALSO BEEN PASSED BY THE SALES-TAX AUTHORITIES ASSESSING THE TURNOVER RELATING TO THE SALE OF IMFL AS THE ASSESSEES TURNOVER. IN SUCH VIEW OF THE MATTER, IT CANNOT BE SAID THAT THE INCOME FROM SALE OF IMFL IS THE INCOME OF THE STATE , HENCE NOT TAXABLE IN VIEW OF ARTICLE 289(1) OF THE CONSTITUTION OF INDIA . IN FACT, IN THE REJOINDER TO THE SUBMISSIONS MADE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ASSESSEE ADMITS THAT IT IS NOT AN INSTRUMENTALITY O F STATE AND IT IS DISTINCT FROM STATE. IF THAT IS THE CASE, THEN IT CANNOT CL AIM IMMUNITY U/S 289(1) OF CONSTITUTION OF INDIA BY TREATING THE INCOME OF WHO LE SALE TRADE IN IMFL AS THE INCOME OF STATE. IT IS ALSO A CONTENTION OF THE ASSESSEE THAT THE ENTIRE SALE PROCEEDS GOES TO THE PD ACCOUNT OF THE STATE G OVERNMENT BEFORE IT REACHES THE ASSESSEE, THEREFORE, IT CANNOT BE HELD TO BE AN APPLICATION OF INCOME. IN THIS CONTEXT, THE LEARNED AR HAS PLACED RELIANCE ON THE GOMS NO. 614 DATED 6-5-2005. A PERUSAL OF THE AFORESAID GOM S, A COPY OF WHICH IS PLACED AT PAGE 153 OF THE PAPER BOOK, WOULD SHOW THAT AS PER THE GOMS, THE PD ACCOUNT IS TO BE OPENED IN THE NAME OF DIREC TOR OF DISTILLERIES AND BREWERIES OF HYDERABAD FOR DEPOSITING THE SALE PR OCEEDS OF LIQUOR BY APBCL. IT FURTHER STATES THAT THE DIRECTOR OF DIS TILLERIES AND BREWERIES SHALL ISSUE INSTRUCTIONS TO ALL THE DEPOT MANAGERS OF AP BCL TO OBTAIN DEMAND DRAFTS IN FAVOUR OF GOVERNMENT OF ANDHRA PRADESH- DIRECTOR OF DISTILLERIES AND BREWERIES FOR THE SALE PROCEEDS OF LIQUOR AND DEPOSIT WITH CONCERNED TREASURY UNDER THE HEAD OF ACCOUNT PROVIDED IN THE AFORESAID GOMS. IT PROVIDES THAT THE DIRECTOR OF DISTILLERIES AND BR EWERIES SHALL APPORTION THE 45 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. RECEIPTS AMONG THE DIFFERENT HEADS LIKE SALES-TAX P RIVILEGE FEE AND SPECIAL PRIVILEGE FEE (SPORTS) TO BE PAID TO THE GOVERNMENT EXCHEQUER ON SALE OF LIQUOR BY ADJUSTMENT FROM THE ABOVE PD ACCOUNT. IT FURTHER STATES THAT THE DIRECTOR SHALL ALSO MAKE PAYMENT TO THE MD, AP BEVE RAGES CORPORATION LIMITED ON REGULAR INTERVALS FOR THE SUPPLIES MADE BY THE DISTILLERIES AND BREWERIES THROUGH CHEQUES BY OPERATING THE ABOVE PD ACCOUNT. 24. THE GOMS ALSO AUTHORISES THE MD OF AP BEVERAG ES CORPORATION LIMITED TO OPERATE OVER-DRAFT ACCOUNT WITH SBH/SBI SUBJECT TO A MAXIMUM LIMIT OF RS.100 CRORES IN A MONTH FOR THE PURPOSE O F INCURRING EXPENDITURE BY THE APBCL. FROM A READING OF THE GOMS, IT BEC OMES CLEAR THAT TILL THE DEPOSIT OF THE AMOUNT IN THE PD ACCOUNT, THERE IS N O QUANTIFICATION OF PRIVILEGE FEE, SPECIAL PRIVILEGE FEE ETC. ONLY AFT ER THE AMOUNT IS DEPOSITED IN THE PD ACCOUNT, THE DIRECTOR OF DISTILLERIES APPORT IONS THE RECEIPTS UNDER DIFFERENT HEADS FOR PAYMENT TO THE GOVERNMENT EXCHE QUER. THESE FACTS COUPLED WITH THE FACT THAT THE SALE INVOICE ALSO DO ES NOT QUANTIFY THE PRIVILEGE FEE, SPECIAL PRIVILEGE FEE ETC., MAKES IT CLEAR THAT THE QUANTIFICATION OF PRIVILEGE FEE AND SPECIAL PRIVILEGE FEE ETC., AS PER SECTION 23A READ WITH THE NEWLY INSERTED SECTION 4A OF THE EXCISE ACT HAS NOT BEEN MADE. IN THESE CIRCUMSTANCES, THE ASSESSEES CLAIM THAT PRIV ILEGE FEE AND SPECIAL PRIVILEGE FEE ARE CONSIDERATIONS FOR CONFERRING A P RIVILEGE, HENCE SHOULD BE ALLOWED AS EXPENDITURE IS NOT TENABLE. ON THE CONTR ARY, THE AFORESAID GOMS GIVES AN IMPRESSION THAT THE INSTRUCTIONS TO DEPOSI T THE SALE PROCEEDS IN THE PD ACCOUNT ARE ONLY AN INTERNAL ARRANGEMENT. THE F ACT THAT THE CORPORATION IS ALLOWED TO OPERATE AN OVER-DRAFT ACC OUNT WITH A LIMIT OF RS.100 CRORE PER MONTH PROVES THAT THE DEPOSIT O F SALE PROCEEDS OF LIQUOR MADE IN THE PD ACCOUNT IS AGAIN PLOUGHED BACK TO T HE ASSESSEE IN THE FORM OF OVERDRAFT ACCOUNT. THAT BESIDES THE CONTENTION OF THE ASSESSEE THAT SALE PROCEEDS NEVER REACHES THE ASSESSEE IS ALSO NOT ACC EPTABLE AS THE AFORESAID GOMS INSTRUCTS THE DEPOT MANAGERS OF THE ASSESSEE C ORPORATION TO OBTAIN 46 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. DEMAND DRAFTS IN FAVOUR OF GOVERNMENT OF A.P. THIS CLEARLY PROVES THAT ONLY AFTER THE SALE PROCEEDS REACH THE ASSESSEE CORPORAT ION, DEMAND DRAFTS ARE TO BE MADE IN FAVOUR OF GOVERNMENT OF A.P FOR DEPOS ITING IN THE P D ACCOUNT. IN THIS VIEW OF THE MATTER, THERE CANNOT BE ANY DIVERSION OF INCOME BY OVERRIDING TITLE. FOR THE SAME REASON, THE PAYMENT OF SURPLUS/MARGIN /PRIVILEGE FEE ETC., BY WHATEVER NAM E CALLED IS ONLY PARTING OF THE PROFIT OF THE ASSESSEE CORPORATION TO THE STATE . IN THE CIRCUMSTANCES, IT CANNOT BE ANYTHING ELSE BUT APPLICATION OF INCOME A ND THEREFORE NOT ALLOWABLE AS AN EXPENDITURE. 25. THE LEARNED AR HAS ADVANCED ELABORATE ARGUMENTS WITH REGARD TO THE SCOPE AND PURPORT OF ARTICLE 283 AND 284 OF THE CONSTI TUTION OF INDIA TO IMPRESS UPON THE FACT THAT THOUGH PD ACCOUNT IS ALSO A P ART OF CONSOLIDATED FUND OF STATE BUT ARTICLE 284 OF THE CONSTITUTION MAK ES A DISTINCTION BETWEEN THE DEPOSITS OF FUNDS INTO PD ACCOUNT NOT TO BE IN NATUR E OF REVENUES AND ARTICLE 283 OF THE CONSTITUTION GOVERNS UTILISATION OF SUCH FUNDS INTO PD ACCOUNT. THE ASSESSEE HAS RELIED UPON THE DECISION OF HONB LE SUPREME COURT IN CASE OF STATE OF UTTAR PRADESH AND OTHERS VS. SHEOPAT RAI & OTHERS [ AIR 1994 (SC) 813] TO ARGUE THAT STATE IS COM PETENT TO IMPOSE A LEVY FOR CONFERRING AN EXCLUSIVE PRIVILEGE UNDER ENTR Y-8 LIST-II OF SEVEN SCHEDULE TO THE CONSTITUTION. THERE IS NO DISPUTE TO THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE AFORESAID DECISION. T HE ISSUE BEFORE US IS WHETHER THERE IS ANY CONSIDERATION TO BE PAID AND WHA T IS THE MODE AND MANNER OF QUANTIFYING SUCH CONSIDERATION. SINCE NOTHING HAS BEEN PRESCRIBED EITHER U/S 23A OF THE EXCISE ACT ( NOW REPEALED) AND NEWLY INSERTED SECTION 4A OF EXCISE ACT, THE CLAIM OF SO-CALLED PRIVILEGE FEE AN D SPECIAL PRIVILEGE FEE PAID TO THE GOVERNMENT CANNOT BE ACCEPTED. SO FAR AS T HE DECISION OF INCOME-TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN THE CASE OF CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD . VS. ACIT (90 DTR 47 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 406), IT WILL NOT APPLY TO THE FACTS OF THE PRESENT CA SE AS THE TRIBUNAL AFTER TAKING INTO CONSIDERATION THE FACT, WHILE DECIDING A WR IT APPLICATION THE HONBLE HIGH COURT OF BOMBAY HAS HELD THAT THE ASSESSEE WH ILE PERFORMING THE DUTIES AS AN AUTHORITY WAS ACTING AS AN AGENT OF THE STATE. THEREFORE, THE INCOME IS THE INCOME OF THE STATE. HOWEVER, NO SUC H PRINCIPAL-AGENT RELATIONSHIP IS DISCERNIBLE IN THE PRESENT APPEAL BEFO RE US. THE LEARNED AR HAD ALSO CITED THE DECISION OF HONBLE SUPREME COURT IN CASE OF STATE OF KERALA AND OTHERS VS. KANDATH DISTILLERIES JUDGMENT D ATED 22-2-2013 TO SUBMIT THAT STATE UNDER THE CONSTITUTION OF INDIA HA S THE EXCLUSIVE PRIVILEGE OVER TRADE IN LIQUOR. NOBODY DISPUTES SUCH RIGHT OF THE STATE AND WE RESPECTFULLY AGREE WITH THE PROPOSITION LAID DOWN BY T HE HONBLE SUPREME COURT BUT THE ISSUE BEFORE US IS NOT WHETHER THE STATE HAS EXCLUSIVE PRIVILEGE OR NOT. THE ISSUE BEFORE US IS TAXABILITY OF INCOME AT T HE HANDS OF THE ASSESSEE CORPORATION WHICH IS DISTINCT AND SEPARATE FROM TH E STATE. 26. THE LEARNED AR HAS RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF GOVERNMENT OF ANDHRA PRADESH VS. HINDUS TAN MACHINE TOOLS LTD. (1975 CTR 164) TO SUBMIT THAT STATE GOVERNMENT HAS POWER TO LEGISLATE RETROSPECTIVELY. THOUGH THERE IS NO DISPUTE TO SUCH PRO POSITION OF LAW BUT THE FACTS INVOLVED IN THAT CASE ARE CLEARLY DISTINGUISHAB LE AND INAPPLICABLE TO THE FACTS OF THE PRESENT CASE, AS WE HAVE ALREADY HELD, B Y THE TIME THE NEW PROVISIONS OF SECTION 4C WERE INSERTED TO THE ACT IN THE YEAR 2012, INCOME HAS ALREADY ACCRUED TO THE ASSESSEE. THAT BESIDES THE SAID PR OVISION ALSO DOES NOT SAY THAT INCOME OF THE ASSESSEE CORPORATION IS THE INCOME OF THE STATE. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN CASE OF DTTDC LTD. (350 ITR 1) AND DECISION OF INCOME-TAX APPELLATE TRIBUNAL, CHENNAI BENCH IN CASE OF TAMILNADU STATE MARKETING CORPORATION VS. ACIT IN ITA 962/MDS/2010 DATED 18-9- 2012. THOUGH WE HAVE GONE THROUGH THE DECISIONS CAREFULLY BUT WE DO NOT FEEL IT NECESSARY TO 48 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. DEAL WITH THEM EXHAUSTIVELY IN THIS ORDER AS WE FOUND THEM TO BE FACTUALLY DISTINGUISHABLE. IT IS A FACT THAT SECTION 23A AND 23B O F THE EXCISE ACT WHICH WERE GOVERNING THE FIELD DURING THE RELEVANT PERIOD NEVER SAID THAT THE PRIVILEGE FEE AND SPECIAL PRIVILEGE ETC., TO BE REMITT ED TO THE GOVERNMENT IS THE INCOME OF THE GOVERNMENT. SECTION 4C INTRODUCED T O THE EXCISE ACT BY WAY OF AN AMENDMENT IN THE YEAR 2012 PROVIDES THAT T HE PRIVILEGE FEE AND SPECIAL PRIVILEGE FEE ETC., PAID TO THE GOVERNMENT ACCOU NT SINCE 1993 SHOULD BE DEEMED TO BE INCOME OF THE STATE. HOWEVER, BY THE TIME THIS AMENDED PROVISION CAME TO THE STATUTE, INCOME HAS ALREADY ACCRUED TO THE ASSESSEE CORPORATION. THEREFORE, CHARGEABILITY TO TAX U/S 4 OF THE ACT OF SUCH INCOME WHICH HAS ALREADY ACCRUED CANNOT BE TAKEN AWAY BY THE R ETROSPECTIVE AMENDMENT MADE BY WAY OF SECTION 4C OF EXCISE ACT. IN THIS CONTEXT, IT IS TO BE OBSERVED THAT ARTICLE 289 OF THE CONSTITUTION OF INDIA IS DIVIDED INTO THREE PARTS. CLAUSE (1) OF ARTICLE 289 SAYS THAT THE P ROPERTY AND INCOME OF STATE SHALL BE EXEMPT FROM UNION TAXATION. ARTICLE 289(2) HOWEVER PROVIDES THAT NOTHING IN CLAUSE(1) SHALL PREVENT THE UNION FROM IMPOSING AND AUTHORISING THE IMPOSITION OF ANY TAX TO SUCH EXTENT, I F ANY, AS PARLIAMENT MAY BY LAW PROVIDE IN RESPECT OF A TRADE OR BUSINESS OF ANY KIND CARRIED ON BY, OR ON BEHALF OF THE GOVERNMENT OR STATE, OR ANY OPERATION CONNECTED THEREWITH, OR ANY PROPERTY USED OR OCCUPIED FOR THE PU RPOSE OF SUCH TRADE OR BUSINESS, OR ANY INCOME ACCRUING OR ARISING IN CONNECTION THEREWITH. ARTICLE 289(3) PROVIDES THAT NOTHING IN CLAUSE(2) SHALL APPLY TO ANY TRADE OR BUSINESS OR TO ANY CLASS OF TRADE OR BUSINESS, WHICH PARLIAME NT MAY BY LAW TO BE INCIDENTAL TO THE ORDINARY FUNCTIONS OF GOVERNME NT. THUS, A PLAIN READING OF THE AFORESAID CLAUSES OF ARTICLE 289 MAKES IT CLEAR THAT THEY ARE MUTUALLY EXCLUSIVE AND SPEAKS OF THREE DIFFERENT SITUAT IONS. IN THE PRESENT CASE, ADMITTEDLY, NO TAX HAS BEEN IMPOSED EITHER ON THE PROPERTY OR INCOME OF THE STATE. ARTICLE 289(3) WOULD ALSO NOT APPLY TO THE FACTS OF THE PRESENT CASE AS THERE IS NO SUCH DECLARATION BY THE PARLIAMENT AN D THEREFORE THE ONLY 49 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. PROVISION LEFT IS ARTICLE 289(2) WHICH IS APPLICABLE TO THE PRESENT CASE. THOUGH IT MAY BE A FACT THAT THE ASSESSEE CORPORATION IS CARRYING OUT THE WHOLESALE DISTRIBUTION OF IMFL AS AN AUTHORITY OF GOVE RNMENT OR ON BEHALF OF GOVERNMENT BUT, THAT CANNOT BE A REASON FOR CLAIMING I MMUNITY FROM TAXATION UNDER THE PROVISIONS OF I T ACT IN VIEW OF A RTICLE 289(2) OF THE CONSTITUTION. THE CONTENTIONS RAISED BY THE LEARNED AR IN THE COURSE OF HEARING AS WELL AS IN THE WRITTEN SUBMISSIONS IN THE PRE SENT APPEAL HAVE BEEN CONSIDERED AND EXHAUSTIVELY DEALT WITH BY THE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH IN CASE OF AP HOUSING BOARD V S. ADDL. CIT (ITA NOS. 717, 1216 TO 1218/HYD/2012 & OTHERS) DATED 31-5 -2013. THE TRIBUNAL AFTER HEARING ALMOST SIMILAR ARGUMENTS PUT FORWARD BY THE ASSESSEE HELD AS UNDER:- 33. WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS M ADE BY BOTH THE PARTIES ORALLY AT THE TIME OF HEARING AS WELL A S THROUGH THEIR RESPECTIVE WRITTEN SUBMISSIONS. WE HAVE ALSO PERUSE D MATERIALS PLACED ON RECORD AS WELL AS IN THE PAPERBOOKS. WE HAVE CAREFU LLY APPLIED OUR MIND TO THE CATENA OF DECISIONS CITED BEFORE US BY BOTH THE PARTIES. BEFORE DWELLING UPON THE MERITS OF THE CONTENTION OF THE P ARTIES WE CONSIDER IT NECESSARY TO NARRATE CERTAIN FACTS. 34.THE ASSESSEE, APHB WAS FORMED UNDER THE AP HOUSI NG BOARD ACT, 1956 OF THE STATE LEGISLATURE. THE MAIN OBJECT OF FORMAT ION OF THE APHB AS SET OUT IN THE PREAMBLE OF THE APHB ACT, 1956 IS TO TAK E SUCH MEASURES, TO MAKE SUCH SCHEMES, AND TO CARRY OUT SUCH WORKS AS A RE NECESSARY FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED OF HOUSING ACCOMMODATION. THE ACTIVITY OF THE ASSESSEE IS TO C ONSTRUCT HOUSING PROJECTS ON LAND PROVIDED BY THE STATE GOVERNMENT O R ACQUIRED BY IT AND SALE IT TO PEOPLE BELONGING TO DIFFERENT INCOME GR OUPS. THE ASSESSEE RECOGNISES INCOME GENERATED FROM THE ACTIVITY OF SA LE OF HOUSES AND ALSO MAINTAINS REGULAR BOOKS OF ACCOUNT WHEREIN SUCH TRA NSACTIONS ARE RECORDED. THE ASSESSEES ACCOUNTS ARE ALSO SUBJECT TO STATUTORY AUDIT UNDER THE PROVISIONS OF THE IT ACT. IT IS ALSO A FA CT THAT FOR THE AY 2004- 50 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 05, 2005-06 AND 2006-07 THE ASSESSEE HAD FILED RETU RN OF INCOME DECLARING CERTAIN INCOME AND ALSO CLAIMING DEDUCTIO N U/S 80-IB OF THE ACT. ASSESSMENTS FOR THE AFORESAID ASSESSMENT YEARS WERE COMPLETED BY REJECTING CLAIM OF DEDUCTION U/S 80IB OF THE ACT AN D ALSO TREATING THE INCOME AS BUSINESS INCOME. IN FACT IT IS EVIDENT FR OM THE ASSESSMENT ORDER PASSED FOR THE ASSESSMENT YEAR 2005-06 THE AS SESSEE ITSELF IN COURSE OF ASSESSMENT PROCEEDING HAD ADMITTED THE PR OFIT FROM SALE OF LAND AS ITS BUSINESS INCOME. THE ASSESSEE CHALLENGED THE ASSESSMENT BEFORE THE FIRST APPELLATE AUTHORITY AND HAVING FAILED THE RE, APPROACHED THE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH. 35. IN COURSE OF HEARING BEFORE THE INCOME-TAX APP ELLATE TRIBUNAL, THE ASSESSEE RAISED CERTAIN ADDITIONAL GROUNDS CLAIMING ITS INCOME TO BE NOT TAXABLE IN VIEW OF THE AMENDMENT BROUGHT RETROSPECT IVELY TO THE APHB ACT BY INTRODUCTION OF SUB-SECTION (7) OF SECTION 58. T HE ADDITIONAL GROUNDS HAVING BEEN RAISED FOR THE FIRST TIME BEFORE THE TR IBUNAL, IT REMANDED THE MATTERS BACK TO THE CIT(A) FOR CONSIDERATION OF ADD ITIONAL GROUNDS AS WELL AS THE OTHER GROUNDS. IN THE MEANWHILE, ASSESSMENT FOR THE AY 2007-08 AND 2008-09 WERE ALSO COMPLETED AND THE ASSESSEES APPEAL AGAINST THE ASSESSMENT ORDERS WERE PENDING BEFORE THE CIT(A). I T WILL BE PERTINENT TO MENTION HERE THAT FOR THE AY 2007-08 AND 2008-09 AL SO THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING INCOME UNDER T HE HEAD INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES AND FOR THE ASSESSMENT YEAR 2007-08 CLAIMED DEDUCTION U/S 80-IB OF THE IT ACT. AFTER THE RETROSPECTIVE AMENDMENT EFFECTED IN THE YEAR 2010 T O THE APHB ACT BY INTRODUCTION OF SUB-SECTION (7) OF SECTION 58 OF TH E APHB ACT, THE ASSESSEE CLAIMED THAT THE INCOME EARNED BY IT IS TH E INCOME OF THE STATE. 36. FROM THE AFORESAID NARRATION OF FACT, IT IS VER Y MUCH CLEAR THAT, BUT, FOR THE AMENDMENT TO THE APHB ACT MADE BY THE STATE LEGISLATURE IN THE YEAR 2010 THE ASSESSEE ALL ALONG HAD BEEN VOLUNTARI LY FILING ITS RETURN OF INCOME BY RECOGNIZING ITS INCOME. IT IS ALSO A FACT THAT THE ASSESSEE ALL ALONG WAS CLAIMING DEDUCTION U/S 80-IB OF THE ACT. ONLY AFTER THE AMENDMENT TO SECTION 58 OF THE APHB ACT, WAS MADE T HE ASSESSEE MADE A CLAIM THAT ITS INCOME IS NOT TAXABLE UNDER THE IT A CT, BY CLAIMING 51 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. IMMUNITY UNDER ARTICLE 289(1) OF THE CONSTITUTION O F INDIA. THE MAIN THRUST OF THE ARGUMENT OF THE LEARNED AR OF THE ASS ESSEE FOR CLAIMING IMMUNITY FROM TAXATION UNDER THE IT ACT, 1961 ARE B ROADLY THE FOLLOWING REASONS: 1. THE APHB IS A CREATURE OF STATUTE, CLOTHED WITH STATUTORY POWERS AND FUNCTIONS UNDER SUPERVISION, CONTROL AND DIRECTION OF THE STATE GOVERNMENT. IT IS AN INSTRUMENTALITY OF THE STATE F OR CARRYING OUT GOVERNMENT FUNCTIONS AND AS SUCH IS AN EXTENDED ARM OF THE GOVERNMENT AND NOT A SEPARATE INDEPENDENT ENTITY WHICH CAN BE SUBJECTED TO TAX. 2. THE STATE GOVERNMENT EXERCISES PERVASIVE CONTROL OVER THE BOARD UNDER THE TERMS OF THE STATUTE, HENCE, IT CANNOT BE REGAR DED AS AN INDEPENDENT AND AUTONOMOUS BODY. 3. THE BOARD IS EMPOWERED WITH STATUTORY POWER TO A CQUIRE LAND, EVICT ANY PERSON FROM THE PREMISES, FOLLOWING THE PROCEDU RE LAID DOWN IN THE ACT, AND RECOVER RENT OR DAMAGES FROM SUCH PERSON. EXERCISE OF SUCH STATUTORY POWER IS INDICATIVE OF THE FACT THAT THE BOARD IS DISCHARGING SOVEREIGN FUNCTION WHICH IS INCONSISTENT WITH PROFI T MAKING VENTURE IN THE NATURE OF TRADE OR BUSINESS. 4. THE ASSESSEE IS USED AS AN INSTRUMENT BY THE STA TE FOR RESOURCE MOBILIZATION FOR WHICH LAND IS ALLOTTED FOR EXPLOIT ING COMMERCIALLY FOR THIS PURPOSE. 5. THE EMPLOYEES OF THE APHB ARE GOVERNED BY THE SA ME TERMS AND CONDITIONS AS ARE APPLICABLE TO THE STATE GOVERNMEN T OFFICERS, WHICH ESTABLISHES THAT IT IS AN EXTENDED ARM OF THE GOVER NMENT. 6. THE ACCOUNTANT GENERAL OF AP HAS CATEGORIZED AP HB FOR CIVIL AUDIT AND NOT FOR COMMERCIAL AUDIT, WHICH SHOWS THAT THE APHB IS NOT CONSIDERED AS A COMMERCIAL ORGANIZATION. 7. THE ACTIVITIES OF THE BOARD ARE NOT UNDERTAKEN W ITH ANY PROFIT MOTIVE. IT ONLY DISCHARGES STATUTORY FUNCTIONS TO CARRY OUT HOUSING SCHEMES OF THE GOVERNMENT OF PROVIDING OF HOUSING INFRASTRUCTURE I N AN ORDERLY MANNER IS A GOVERNMENTAL FUNCTION AND APHB IS CARRYING OUT SU CH SCHEMES ON BEHALF 52 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. OF THE GOVERNMENT. FURTHER AS PROVIDED UNDER THE ST ATUTORY PROVISIONS THE REVENUE GENERATED BY THE BOARD IS EITHER SPENT FOR HOUSING INFRASTRUCTURE OR IT VESTS IN THE CONSOLIDATED FUND OF THE STATE. 8. APHB HAS BEEN CREATED UNDER A STATUTE TO WORK AS AN EXECUTING AGENCY OF THE STATE GOVERNMENT. ALL THE INGREDIENTS RELATI ONSHIP BETWEEN PRINCIPAL AND AGENT ARE PRESENT IN THE STATUTORY AR RANGEMENT BETWEEN THE STATE GOVERNMENT AND APHB. THE FUNDS AND LAND ARE P ROVIDED BY THE GOVERNMENT AND ANY SURPLUS OVER THE EXPENDITURE IS INCURRED FOR THE PURPOSES OF THE ACT VESTS IN THE CONSOLIDATED FUND OF THE STATE. THOUGH APHB ENTERS INTO CONTRACT IN ITS OWN NAME BUT IN EF FECT IT IS DOING SO ON BEHALF OF THE STATE. IN LAW OF AGENCY WHAT IS TO BE SEEN IS WHETHER THE PROFIT OR LOSS ARISING IN THE COURSE OF THE DEALING OF THE AGENT ACCRUES TO THE PRINCIPAL AND NOT TO THE AGENT. 37. THE LEARNED COUNSEL FOR THE ASSESSEE TAKING US THROUGH VARIOUS PROVISIONS OF THE APHB ACT,1956 HAD SUBMITTED THAT THE STATE G OVERNMENT EXERCISES PERVASIVE CONTROL OVER THE BOARD. TO EMPHASIZE SUCH CONTENTION HE REFERRED TO THE TRANSFER ORDER OF ONE SHRI G. SAI PRASAD AND AP POINTMENT OF LAW OFFICER. HE SUBMITTED THAT THE BOARD CANNOT TAKE ANY DECISION O N ITS OWN BUT EVERY ACTION OF THE BOARD HAS TO BE WITH THE APPROVAL OF THE GOV ERNMENT. IN THIS CONTEXT THE LEARNED COUNSEL REFERRED TO THE MINUTES OF MEETING HELD IN THE CHAMBER OF THE CHIEF MINISTER. HE FURTHER SUBMITTED THAT RAJIV GRU HA KALPA SCHEME IS A SCHEME OF THE STATE GOVERNMENT AND THE BOARD IS ONLY IMPLE MENTING IT AS AN AGENCY OF THE GOVERNMENT. HE FURTHER SUBMITTED THAT FOR MOBIL IZING RESOURCES BY WAY OF SALE OF LAND THE BOARD IS UTILIZED AS A TOOL. IT WA S SUBMITTED THAT THE MODE AND MANNER OF MAINTAINING THE ACCOUNTS IS ALSO AS PER T HE DIRECTION OF THE GOVERNMENT. FOR MORTGAGING ALSO PERMISSION IS REQUI RED. IN SUM AND SUBSTANCE IT IS THE CONTENTION OF THE LEARNED COUNSEL THAT T HE STATE GOVERNMENT EXERCISES PERVASIVE CONTROL AND THE BOARD AS SUCH IS NOT AN I NDEPENDENT AUTONOMOUS BODY BUT IS AN EXTENDED ARM OF THE STATE GOVERNMENT. IT IS THE SUBMISSION OF THE LEARNED COUNSEL THAT THE INCOME OF THE BOARD THEREF ORE, IN EFFECT, IS THE INCOME OF THE STATE GOVERNMENT, HENCE, FOR THAT REASON IMM UNE FROM TAXATION UNDER ARTICLE 289(1) OF THE CONSTITUTION OF INDIA. 53 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 38. ALL THE AFORESAID CONTENTIONS RAISED BY THE LEA RNED COUNSEL HAS BEEN DEALT WITH AND ANSWERED BY THE HONBLE SUPREME COURT IN C ASE OF APSRTC V/S. ITO, 52 ITR 524. THE HONBLE SUPREME COURT WHILE AFFIRMI NG THE DECISION OF THE HONBLE AP HIGH COURT EXAMINED THE PROVISIONS OF AP SRTC ACT VIS--VIS ARTICLE 289 OF THE CONSTITUTION OF INDIA AND HELD THAT THE INCOME OF THE APSRTC CANNOT BE HELD TO BE THE INCOME OF THE STATE GOVERNMENT AS APSRTC HAS ITS OWN IDENTITY AND DISTINCT FROM THE GOVERNMENT. THE HON BLE SUPREME COURT ANLAYSING THE THREE CLAUSES OF ARTICLE 289 OF CONST ITUTION OF INDIA, HELD IN THE FOLLOWING MANNER: READING THE THREE CLAUSES TOGETHER, ONE CONSIDERATI ON EMERGES BEYOND ALL DOUBT AND THAT IS THAT THE PROPERTY AS W ELL AS THE INCOME IN RESPECT OF WHICH EXEMPTION IS CLAIMED UNDER CLAU SE (1) MUST BE THE PROPERTY AND INCOME OF THE STATE, AND SO, THE S AME QUESTION FACES US AGAIN: IS THE INCOME DERIVED BY THE APPELL ANT FROM ITS TRANSPORT ACTIVITIES THE INCOME OF THE STATE ? IF A TRADE OR BUSINESS IS CARRIED ON BY THE STATE DEPARTMENTALLY AND INCOM E IS DERIVED FROM IT, THERE WOULD NO DIFFICULTY IN HOLDING THAT THE SAID INCOME IS THE INCOME OF THE STATE. IF A TRADE OR BUSINESS IS CARRIED ON BY A STATE THROUGH ITS AGENTS APPOINTED EXCLUSIVELY FOR THAT PURPOSE, AND THE AGENTS CARRY IT ON ENTIRELY ON BEHALF OF THE ST ATE AND NOT ON THEIR OWN ACCOUNT, THERE WOULD BE NO DIFFICULTY IN HOLDING THAT THE INCOME MADE FROM SUCH TRADE OR BUSINESS IS THE INCO ME OF THE STATE. BUT DIFFICULTIES ARISE WHEN WE ARE DEALING W ITH TRADE OR BUSINESS CARRIED ON BY A CORPORATION ESTABLISHED BY A STATE BY USING A NOTIFICATION UNDER THE RELEVANT PROVISIONS OF THE ACT. THE CORPORATION, THOUGH STATUTORY, HAS A PERSONALITY OF ITS OWN AND THIS PERSONALITY IS DISTINCT FROM THAT OF THE STATE OR O THER SHAREHOLDERS. IT CANNOT BE SAID THAT A SHAREHOLDER OWNS THE PROPE RTY OF THE CORPORATION OR CARRIES ON THE BUSINESS WITH WHICH T HE CORPORATION IS CONCERNED. THE DOCTRINE THAT A CORPORATION HAS A SE PARATE LEGAL ENTITY OF ITS OWN IS SO FIRMLY ROOTED IN OUR NOTION S DERIVED FROM COMMON LAW THAT IT IS HARDLY NECESSARY TO DEAL WITH IT ELABORATELY; AND SO, PRIMA FACIE, THE INCOME DERIVED BY THE APPE LLANT FROM ITS TRADING ACTIVITY CANNOT BE CLAIMED BY THE STATE WHI CH IS ONE OF THE SHAREHOLDERS OF THE CORPORATION. 39. THE HONBLE SUPREME COURT AFTER ANALYZING THE DIFFERENT CLAUSES OF ARTICLE 289(1) IN THE CONTEXT OF THE CLAIM MADE BY THE ASSE SSEE HELD AS UNDER: THE MAIN POINT WHICH WE ARE EXAMINING AT THIS STAG E: IS THE INCOME DERIVED BY THE APPELLANT FROM ITS TRADING ACTIVITY, INCOME OF THE STATE 54 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. UNDER ARTICLE 289(1) ? IN OUR OPINION, THE ANSWER T O THIS QUESTION MUST BEIN THE NEGATIVE. FAR FROM MAKING ANY PROVISION WH ICH WOULD MAKE THE INCOME OF THE CORPORATION THE INCOME OF THE STATE, ALL THE RELEVANT PROVISIONS EMPHATICALLY BRING OUT THE SEPARATE PERS ONALITY OF THE CORPORATION AND PROCEED ON THE BASIS THAT THE TRADI NG ACTIVITY IS RUN BY THE CORPORATION AND THE PROFIT AND LOSS THAT WOULD BE MADE AS A RESULT OF THE TRADING ACTIVITY WOULD BE THE PROFIT AND LOSS O F THE CORPORATION. THERE IS NO PROVISION IN THE ACT WHICH HAS ATTEMPTED TO L IFT THE VEIL FROM THE FACE OF THE CORPORATION AND THEREBY ENABLE THE SHAR EHOLDERS TO CLAIM THAT DESPITE THE FROM WHICH THE ORGANIZATION HAS TAKEN, IT IS THE SHAREHOLDERS WHO RUN THE TRADE AND WHO CAN CLAIM THE INCOME COMI NG FROM IT AS THEIR OWN. SECTION 28 WHICH PROVIDES FOR THE PAYMENT OF I NTEREST CLEARLY BRINGS OUT THE DUALTY BETWEEN THE CORPORATION ON THE ONE H AND AND THE STATE AND CENTRAL GOVERNMENTS ON THE OTHER. TAKE, FOR INSTANC E, THE CASE OF SUPERSESSION OF THE CORPORATION AUTHORIZED BY SECTI ON 38. SECTION 38(2)(C) EMPHATICALLY BRINGS OUT THE FACT THAT THE PROPERTY REALLY VESTS IN THE CORPORATION, BECAUSE IT PROVIDES THAT DURING THE PE RIOD OF SUPERSESSION, IT SHALL VEST IN THE STATE GOVERNMENT. SIMILARLY, SECT ION 39(2) WHICH DEALS WITH THE DISTRIBUTION OF ASSETS IN CASE OF LIQUIDAT ION, BRINGS OUT THE SAME FEATURE. IT HAS BEEN URGED BEFORE US BY THE ADVOCAT E-GENERAL THAT SECTION 30 CONTEMPLATES THAT AFTER PROVISIONS IS MADE AS RE QUIRED BY SECTION 28 AND 29 AND FUNDS ARE UTILIZED AS PRESCRIBED BY SECT ION 30, THE BALANCE HAS TO BE GIVEN TO THE STATE GOVERNMENT FOR THE PURPOSE OF ROAD DEVELOPMENT, AND THAT, IT IS SUGGESTED, INDICATES THAT INCOME BE LONGS TO THE STATE GOVERNMENT. THIS ARGUMENT IS CLEARLY NOT WELL-FOUND ED. WHEN WE ARE DECIDING THE QUESTION AS TO WHETHER THE INCOME DERI VED BY THE CORPORATION IS THE INCOME OF THE STATE, THE PROVISION MADE BY S ECTION 30 FOR MAKING OVER TO THE STATE GOVERNMENT THE BALANCE THAT MAY R EMAIN AS INDICATED THEREIN, IS OF NO ASSISTANCE. THE INCOME IS UNDOUBT EDLY THE INCOME OF THE CORPORATION. ALL THAT SECTION 30 REQUIRES IS THAT A PART OF THAT INCOME MAY BE ENTRUSTED TO THE STATE GOVERNMENT FOR A SPECIFIC PURPOSE OF ROAD DEVELOPMENT. IT IS NOT SUGGESTED OR SHOWN THAT WHEN SUCH INCOME IS MADE OVER TO THE STATE, IT BECOMES A PART OF THE GE NERAL REVENUE OF THE STATE. IT IS INCOME WHICH IS IMPRESSED WITH AN OBLI GATION AND WHICH CAN BE 55 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. UTILIZED BY THE STATE GOVERNMENT ONLY FOR THE SPECI FIC PURPOSE FOR WHICH IT IS ENTRUSTED TO IT. THEREFORE, WE ARE SATISFIED THA T THE INCOME DERIVED BY THE APPELLANT FROM ITS TRADING ACTIVITY CANNOT BE S AID TO BE THE INCOME OF THE STATE UNDER ARTICLE 289(1), AND IF THAT IS SO, THE FACTS THAT THE TRADING ACTIVITY CARRIED ON BY THE APPELLANT MAY BE COVERED BY ARTICLE 289(2) DOES NOT REALLY ASSIST THE APPELLANTS CASE. EVEN IF A T RADING ACTIVITY FALLS UNDER CLAUSE (2) OF ARTICLE 289, IT CAN SUSTAIN A CLAIM F OR EXEMPTION FROM UNION TAXATION ONLY IF IT IS SHOWN THAT THE INCOME DERIVE D FROM THE SAID TRADING ACTIVITY IS THE INCOME OF THE STATE. THAT IS HOW UL TIMATELY, THE CRUX OF THE PROBLEM IS TO DETERMINE WHETHER THE INCOME IN QUEST ION IS THE INCOME OF THE STATE, AND ON THIS VITAL TEST, THE APPELLANT FA ILS. 40. EVEN THOUGH THE LEARNED AR HAS TRIED TO IMPRESS UPON US THAT THE ASSESSEE BOARD IS NOTHING BUT AN EXTENDED ARM OF TH E GOVERNMENT OR PART OF THE GOVERNMENT, BUT, IN OUR VIEW, IT IS NOT SO. SUB -SECTION (2) OF SECTION 3 OF THE APHB ACT, 1956 READS AS UNDER: THE BOARD SHALL BE A BODY CORPORATE HAVING PERPETUA L SUCCESSION AND A COMMON SEAL AND MAY SUE AND BE SUED IN ITS CO RPORATE NAME AND SHALL BE COMPETENT TO ACQUIRE AND HOLD PROPERTY BOTH MOVEABLE AND IMMOVEABLE AND TO CONTRACT AND DO ALL THINGS NE CESSARY FOR THE PURPOSE OF THIS ACT. 41. A READING OF THE AFORESAID PROVISION MAKES IT C LEAR THAT THE ASSESSEE IS A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A CO MMON SEAL AND IT CAN SUE AND BE SUED IN ITS CORPORATE NAME. THE SAID PROVISI ON ALSO MAKES IT CLEAR THAT THE BOARD SHALL BE COMPETENT TO ACQUIRE AND HOLD PR OPERTY BOTH MOVABLE AND IMMOVABLE AND TO CONTRACT AND DO ALL THINGS NECESS ARY FOR THE PURPOSES OF THE ACT. SUB-SECTION (3) OF SECTION 3 OF THE ACT PROVID ES THAT THE BOARD SHALL BE DEEMED TO BE A LOCAL AUTHORITY FOR THE PURPOSES OF LAND ACQUISITION ACT, 1894. THE CONSTITUTION OF THE BOARD SHALL BE AS PER SECTI ON 4 OF THE APHB ACT. AS PER THE AFORESAID PROVISION, THE BOARD SHALL BE CONSTIT UTED OF MEMBERS, WHO ARE NOT ONLY GOVERNMENT OFFICIALS BUT ALSO REPRESENTATIVE O F THE FINANCIAL INSTITUTION PROVIDING FINANCIAL ASSISTANCE TO THE BOARD. SECTIO NS 5 TO 12 DEAL WITH THE TERMS OF OFFICE AND CONDITIONS OF SERVICE OF THE MEMBERS, FILING UP VACANCIES, APPOINTMENT OF COMMITTEES, MEETING OF THE BOARD ETC . SECTION 13 OF THE ACT EMPOWERS THE BOARD TO ENTER INTO AND PERFORM ALL SU CH CONTRACTS AS IT MAY 56 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. CONSIDER NECESSARY OR EXPEDIENT FOR CARRYING OUT AN Y OF THE PURPOSES OF THE ACT. SECTION 14 OF THE ACT PROVIDES THAT EVERY CONTRACT SHALL BE MADE ON BEHALF OF THE BOARD BY THE VICE CHAIRMAN AND HOUSING COMMISSI ON. HOWEVER, AMENDMENT WAS MADE BY ACT NO. 12 OF 2010 BY INTRODUCING NEW C LAUSES WHICH REQUIRE SANCTION OF THE GOVERNMENT IF THE CONTRACT EXCEEDS CERTAIN MONETARY LIMIT FIXED BY THE GOVERNMENT. SECTION 21 OF THE ACT PROVIDES T HAT THE BOARD SUBJECT TO THE CONTROL OF THE GOVERNMENT MAY INCUR EXPENDITURE AND UNDERTAKE WORKS FOR THE FRAMING AND EXECUTION OF SUCH HOUSING SCHEMES AS IT MAY CONSIDER NECESSARY OR AS MAY BE ENTRUSTED BY THE GOVERNMENT. SECTION 58 P ROVIDES THAT THE BOARD SHALL HAVE ITS OWN FUND AND MAY ACCEPT GRANTS, SUBV ENTIONS, DONATIONS, GIFTS OR LOANS FROM THE CENTRAL OR STATE GOVERNMENT OR A LOC AL AUTHORITY OR ANY INDIVIDUAL OR BODY, WHETHER INCORPORATED OR NOT FOR ALL OR ANY OF THE PURPOSES OF THE ACT. IT ALSO PROVIDED THAT GOVERNMENT SHALL EVERY YEAR MAKE A GRANT TO THE BOARD OF A SUM EQUIVALENT TO THE ADMINISTRATIVE EXPENSES OF TH E BOARD. SECTION 58(4) PROVIDES THAT ALL MONEYS RECEIVED BY THE BOARD, ALL PROCEEDS OF LAND OR ANY OTHER KIND OF PROPERTY SOLD BY THE BOARD, ALL RENTS , BETTERMENT CHARGES AND ALL INTEREST, PROFITS AND OTHER MONEYS ACCRUING TO THE BOARD SHALL CONSTITUTE THE FUND OF THE BOARD. AN AMENDMENT WAS MADE TO SECTION 58 BY ACT NO. 12 OF 2010 BY INTRODUCING SUB-SECTION (7) WITH RETROSPECTIVE E FFECT FROM 01/04/2002. THE NEWLY INTRODUCED SUB-SECTION (7) PROVIDES THAT THE SURPLUS NET REVENUE AFTER MEETING THE EXPENDITURE OF THE BOARD SHALL VEST IN CONSOLIDATED FUND OF THE STATE OF ANDHRA PRADESH. SECTION 59 OF THE ACT AS I T STOOD EARLIER PROVIDED THAT ALL PROPERTY, THE BOARD FUND AND ALL OTHER ASSETS V ESTING IN THE BOARD SHALL BE HELD AND APPLIED BY IT, SUBJECT TO THE PROVISIONS A ND FOR THE PURPOSES OF THE ACT. HOWEVER, THE EARLIER SECTION 59 WAS SUBSTITUTED BY A NEW SECTION 59 BY ACT NO. 12 OF 2010 WITH RETROSPECTIVE EFFECT FROM 01/04/200 2. THE AMENDED SECTION 59 READS AS UNDER: 59. APPLICATION OF THE FUND: SUBJECT TO THE PROVISI ONS CONTAINED IN SUB-SECTION (7) OF SECTION 58 ALL PROPERTY, THE BOA RD FUND AND ALL OTHER ASSETS VESTING IN THE BOARD SHALL BE HELD AND APPLIED BY IT, SUBJECT TO THE PROVISIONS AND FOR THE PURPOSES OF T HIS ACT. SECTION 81 OF THE ACT EMPOWERS THE GOVERNMENT TO D ISSOLVE THE BOARD. 57 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 42. ON GOING THROUGH THE AFORESAID PROVISIONS IT BE COMES CLEAR THAT THE BOARD HAS AN INDEPENDENT IDENTITY DISTINCT FROM THE STATE GOVERNMENT. THE BOARD IS ALSO CONSTITUTED FOR THE PURPOSE OF CARRYING OUT TH E WORK AS ENVISAGED UNDER THE PREAMBLE OF THE ACT. THE BOARD CERTAINLY CANNOT BE EQUATED WITH THE GOVERNMENT OR A DEPARTMENT OF THE GOVERNMENT AS IT DOES NOT PERFORM ANY OF THE DUTIES OF THE GOVERNMENT OR A GOVERNMENT DEPART MENT. IT IS QUITE OBVIOUS THAT THE BOARD IS A STATUTORY BODY PERFORMING STATU TORY FUNCTIONS DISTINCT FROM THE STATE GOVERNMENT. IT MAY BE A FACT THAT THE STA TE GOVERNMENT EXERCISES SOME AMOUNT OF CONTROL OVER THE FUNCTIONING OF THE BOARD SIMILAR TO CONTROL EXERCISED OVER ALL OTHER GOVERNMENT CORPORATION AND PUBLIC SECTOR UNDERTAKINGS BUT THAT DOES NOT TAKE AWAY THE INDEPENDENT IDENTIT Y OR CHARACTER OF THE BOARD. THEREFORE, IT CANNOT BE SAID THAT THE INCOME OF THE ASSESSEE BOARD IS THE INCOME OF THE STATE GOVERNMENT. IN CASE OF VIDARBHA HOUSI NG BOARD V/S. ITO (SUPRA), THE HONBLE BOMBAY HIGH COURT AFTER INTERPRETING TH E PROVISIONS OF THE MP HOUSING BOARD ACT, 1950, WHICH ARE AKIN TO THE PROV ISIONS IN APHB ACT, VIS--VIS THE ASSESSEES CLAIM OF IMMUNITY UNDER ARTICLE 289( 1) OF THE CONSTITUTION OF INDIA HELD AS UNDER: 13. IN OUR VIEW, THOUGH IT IS TRUE THAT THE STATE HAS UNDOUBTEDLY AN OBLIGATION TO PROMOTE THE WELFARE OF ITS CITIZENS A ND PROVIDING HOUSING ACCOMMODATION WOULD BE ONE OF THE WELFARE ACTIVITIE S OF THE STATE, THE QUESTION IS WHETHER BY CONSTITUTING THE PETITIONER BOARD UNDER THE MADHYA PRADESH HOUSING BOARD ACT, 1950, A SEPARATE L EGAL ENTITY HAS BEEN ESTABLISHED UNDERTAKING THE VARIOUS ACTIVITIES ON ITS OWN OR WHETHER THE ENTITY ESTABLISHED IS EITHER A DEPARTME NT OF THE STATE GOVERNMENT OR AN AGENT OF THE STATE GOVERNMENT ACTI NG ON BEHALF OF THE STATE GOVERNMENT, FOR, IT IS OBVIOUS THAT IF TH E ACTIVITY UNDERTAKEN IS BEING PERFORMED BY THE PETITIONER BOARD DIRECTLY AS THE DEPARTMENT OF THE STATE GOVERNMENT OR AS AN AGENT ACTING ON BE HALF OF THE STATE GOVERNMENT, IT WOULD BE CLEAR THAT THE PROPERTY AND INCOME OF THE BOARD WOULD BE THE PROPERTY AND INCOME OF THE STATE GOVERNMENT, BUT IF THAT BE NOT THE CASE AND IF THE BOARD UNDER RELE VANT PROVISIONS OF THE ACT IS A SEPARATE LEGAL ENTITY DISCHARGING FUNCTION S ENJOYED UPON IT ON ITS OWN AND NOT AS AN AGENT OR DEPARTMENT OF THE ST ATE GOVERNMENT, THEN CLEARLY THE IMMUNITY CLAIMED BY THE PETITIONER BOARD UNDER ARTICLE 289(1) OF THE CONSTITUTION WOULD NOT BE AVAILABLE T O IT. IN OUR VIEW, WITH THE POSSIBLE EXCEPTION OF THE PROVISION CONTAI NED IN SECTION 32A, NONE OF THE OTHER FEATURES POINTED OUT BY MR. THAKA R SHOWS AT ALL THAT THE BOARD IS A DEPARTMENT OF THE STATE GOVERNMENT O R IS ITS AGENT AND EVEN THE PROVISIONS OF SECTION 32A DONES NOT INDICA TE THAT. UNDER THAT 58 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. SECTION ALL MONEYS RECOVERABLE BY THE BOARD UNDER T HE ACT OR UNDER ANY AGREEMENT ARE DECLARED TO BE RECOVERABLE AS ARR EARS OF LAND REVENUE AND MR. THAKAR URGED THAT THIS PROVISION SH OWED THAT THE BOARD WILL HAVE TO BE REGARDED AS RECOVERIES OF THE STATE GOVERNMENT, OTHERWISE THESE WOULD NOT HAVE BEEN MADE RECOVERABL E AS ARREARS OF LAND REVENUE. IN OUR VIEW, IT IS NOT POSSIBLE TO AC CEPT THIS SUBMISSION OF MR. THAKAR, FOR, ALL THAT SECTION 32A PROVIDES F OR IS MERELY INDICATE A MODE A RECOVERY AND SIMPLY BECAUSE A PARTICULAR MOD E OF RECOVERY WHICH IS GENERALLY AVAILABLE TO THE STATE GOVERNMEN T FOR MAKING ITS RECOVERIES HAS BEEN MADE AVAILABLE TO THE BOARD FOR MAKING ITS RECOVERIES, IT CANNOT MEAN THAT THE SAID RECOVERIES BECOMES RECOVERIES OF THE STATE GOVERNMENT OR THAT THE RECOVERIES MADE BY ADOPTING THAT PARTICULAR MODE BECOME RECOVERIES MADE BY THE BOARD FOR AND ON BEHALF OF THE STATE GOVERNMENT. SIMILARLY, THE PROV ISION UNDER WHICH THE BOARD HAS BEEN DEEMED TO BE A LOCAL AUTHORITY F OR THE PURPOSES OF THE LAND ACQUISITION ACT COULD NOT BE SUGGESTIVE OF AN INFERENCE WHICH WOULD FAVOUR OR SUPPORT THE PETITIONER'S CONTENTION . IN FACT, THE PROVISION CONTAINED IN SECTION 3(3) IS A DEEMING PR OVISION WHICH IMPLIES THAT BUT FOR THE SAID PROVISION THE BOARD W OULD BE NOT A LOCAL AUTHORITY, AND WHAT IS MORE, IT HAS BEEN DECLARED L OCAL AUTHORITY FOR THE PURPOSES OF CERTAIN ENACTMENT, NAMELY, THE LAND ACQUISITION ACT, WHICH ONLY FACILITATES ACQUISITION OF PROPERTIES FO R THE BOARD. THE FEATURES THAT THE BOARD AS A CORPORATE BODY HAS NO POWER TO RAISE SHARE CAPITAL OR THAT ITS ACTIVITIES ARE NOT OF TRA DING OR COMMERCIAL NATURE OR THAT THE ELEMENT OF PROFIT-MAKING IS ABSE NT MAY HAVE SOME RELEVANCE ON THE POINT WHETHER ITS INCOME WILL ATTR ACT EXEMPTION UNDER SECTION 4(3)(I) OF THE 1922 ACT, BUT FROM THESE FEA TURES NO INFERENCE COULD BE DRAWN THAT THE BOARD IS A MERE DEPARTMENT OF THE STATE GOVERNMENT OR ITS AGENT. IT IS TRUE THAT UNDER THE ACT THE BOARD WHILE DISCHARGING ITS FUNCTIONS DOES SO UNDER THE GENERAL SUPERVISION AND CONTROL OF THE STATE GOVERNMENT BUT THAT BY ITSELF CANNOT LEAD TO THE NECESSARY INFERENCE THAT THE BOARD IS A DEPARTMENT OR AGENT OF THE STATE GOVERNMENT. AS AGAINST THIS, THERE ARE SEVERA L PROVISIONS IN THE ACT WHICH SUPPORT MR. MANOHAR'S CONTENTION FOR THE 1ST RESPONDENT. 14. IN THE FIRST PLACE, AS WE HAVE STATED IN THE EA RLIER PART OF THE JUDGMENT, THE VERY CONSTITUTION OF THE BOARD UNDER SECTION 3 OF THE ACT CLEARLY SHOWS THAT THE BOARD ON ITS INCORPORATION S HALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND COMMON SE AL. THIS PROVISION CLEARLY SHOWS THAT PRIMA FACIE THE BOARD IS STATUTORY ENTITY DISTINCT FROM THE STATE GOVERNMENT. EVEN THE CONSTI TUTION OF THE BOARD WHICH HAS BEEN PROVIDED FOR BY SECTION 4 CLEARLY SH OWS THAT SOME MEMBERS OF THE BOARD COULD BE NOMINATED BY THE SPEA KER OF THE LEGISLATIVE ASSEMBLY AND BY THE STATE GOVERNMENT. T HE PROVISION CONTAINED IN SECTION 12 OF THE ACT WOULD BE A CLEAR POINTER TO THE BOARD BEING A SEPARATE ENTITY DISTINCT FROM THE STATE GOV ERNMENT. UNDER THAT SECTION THE BOARD SHALL HAVE ITS OWN FUND AND SUCH FUND IS TO GET 59 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. AUGMENTED BY ACCEPTANCE OF GRANTS, SUBVENTIONS, DON ATIONS OR GIFTS AS WELL AS LOANS FROM THE CENTRAL OR THE STATE GOVERNM ENTS AND OBVIOUSLY THE BOARD WOULD BE PAYING INTEREST ON SUCH LOANS. N OW, IF THE BOARD WERE THE DEPARTMENT OF THE GOVERNMENT OR AN AGENT U NDERTAKING VARIOUS ACTIVITIES FOR AND ON BEHALF OF THE GOVERNM ENT, NO PROVISION WOULD HAVE BEEN MADE ENABLING THE BOARD TO BORROW L OANS FROM THE STATE GOVERNMENT OR TO PAY INTEREST THEREON TO THE STATE GOVERNMENT, FOR, IT IS INCONCEIVABLE THAT A PARTY WOULD BY INTE REST TO ITSELF. THIS PROVISION, IN OUR VIEW, IS A CLEAR POINTER TO THE F ACT THAT THE BOARD IS A DISTINCT ENTITY APART FROM THE STATE GOVERNMENT AND NOT DEPARTMENT OR AN AGENT OF THE STATE GOVERNMENT. ON THE OTHER HAND , THIS PROVISION CLEARLY SUGGESTS THAT THE BOARD IS A SEPARATE ENTIT Y, POSSESSES ITS OWN PROPERTY, ASSETS OR FUNDS AND UNDERTAKES THE VARIOU S ACTIVITIES ON ITS OWN ACCOUNT. THE OTHER PROVISION WHICH, IN OUR VIEW , IS OF A CLINCHING CHARACTER IS THE ONE TO BE FOUND IN SECTION 40(2) O F THE ACT. THAT PROVISION INDICATES AS TO WHAT SHOULD HAPPEN TO THE PROPERTY AND ASSETS OF THE BOARD UPON ITS DISSOLUTION BEING MADE BY THE STATE GOVERNMENT. UNDER SUB-CLAUSE (A) OF SUB-SECTION (2) OF SECTION 40 IT IS PROVIDED THAT WITH EFFECT FROM THE DATE SPECIFIED I N THE NOTIFICATION UNDER SUB-SECTION (1), ALL PROPERTIES, FUNDS AND DU ES WHICH ARE VESTED IN OR REALIZABLE BY THE BOARD SHALL VEST IN AND BE REALIZABLE BY THE STATE GOVERNMENT. IF THE BOARD WAS ACTING AS DEPART MENT OF THE STATE GOVERNMENT OR WAS MERELY AS AGENT UNDERTAKING THE A CTIVITIES FOR AND ON BEHALF OF THE STATE GOVERNMENT, IT WAS UTTERLY U NNECESSARY TO MAKE THE PROVISION OF THE TYPE INDICATED ABOVE. THE VERY FACT THAT PROVISION HAS BEEN MADE IN SECTION 40(2)(A) THAT UPON THE DIS SOLUTION OF THE BOARD ALL PROPERTIES FUNDS AND DUES RECOVERABLE BY THE BOARD SHALL VEST IN THE GOVERNMENT CLEARLY SHOWS THAT THE BOARD IS A DISTINCT ENTITY AND IS NOT AN AGENT OR A DEPARTMENT OF THE STATE GOVERN MENT. SIMILARLY, SECTION 40(2)(B) IS FURTHER INDICATION IN THE SAME DIRECTION. IT PROVIDES THAT ALL LIABILITIES ENFORCEABLE AGAINST THE BOARD SHALL BE ENFORCEABLE AGAINST THE STATE GOVERNMENT BUT ONLY TO THE EXTENT OF THE PROPERTIES, FUNDS AND DUES VESTED IN AND REALISED BY THE STATE GOVERNMENT. IN OTHER WORDS, UPON THE DISSOLUTION OF THE BOARD IF T HE BOARD IS FOUND TO HAVE CREATED LIABILITY IN EXCESS OF ITS ASSETS OR P ROPERTIES AND FUNDS WHICH SHALL VEST IN THE STATE GOVERNMENT, THEN THE STATE GOVERNMENT IS NOT RESPONSIBLE FOR SUCH EXCESS LIABILITIES INCU RRED BY THE BOARD. IF THE BOARD WERE MERELY ACTING AS A DEPARTMENT OF THE STATE GOVERNMENT OR AS AN AGENT OF THE STATE GOVERNMENT, THEN THE STATE GOVERNMENT WOULD HAVE BEEN LIABLE FOR ALL THE LIABI LITIES CREATED BY THE BOARD. THESE PROVISIONS, IN OUR VIEW, RUN COUNTER T O THE CONTENTION URGED BY MR. THAKAR BEFORE US THAT THE PETITIONER-B OARD, WHEN IT UNDER TOOK THE ACTIVITIES ENJOINED UPON IT BY THE ACT, DI D SO EITHER AS A DEPARTMENT OF THE STATE GOVERNMENT OR AS AN AGENT O F THE STATE GOVERNMENT ACTING ON BEHALF OF THE STATE GOVERNMENT . ON THE OTHER HAND, THESE PROVISIONS CLEARLY SHOW THAT THE PETITI ONER-BOARD IS A SEPARATE STATUTORY BODY DISTINCT FROM THE STATE GOV ERNMENT AND IT HAS 60 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. BEEN UNDERTAKING THE ACTIVITIES ENJOINED ON IT NOT AS AN AGENT OF THE STATE GOVERNMENT BUT ON ITS OWN. IF THAT THE POSITI ON WHICH REALLY EMERGES FROM EXAMINATION OF THE SEVERAL PROVISIONS OF THE ACT, IT SEEMS TO US VERY CLEAR THAT THE INCOME AND PROPERTY OF THE BOARD COULD NOT BE REGARDED AS INCOME AND PROPERTY OF THE STATE GOVERNMENT, WITH THE RESULT THAT THE IMMUNITY CLAIM ED BY THE PETITIONER-BOARD UNDER ARTICLE 289(1) OF THE CONSTI TUTION IS CLEARLY NOT AVAILABLE TO THE PETITIONER-BOARD. IN OUR VIEW, THE REFORE, ON AN EXAMINATION OF THE PROVISIONS OF THE ACT, THE CONTE NTION RAISED BY MR. THAKAR MUST FAIL. 43. THE HONBLE BOMBAY HIGH COURT WHILE COMING TO S UCH CONCLUSION ALSO FOLLOWED THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CASE OF APSRTC V/S. ITO (SUPRA) AND HELD AS UNDER: 15. IN THIS CONTEXT IT WOULD NOT BE OUT OF PLACE TO REFER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION V. INCOME-TAX OFFICER. IN THAT CASE A SIMILAR QUESTION BASED ON THE PROVISIO NS OF THE ARTICLE 289(1) OF THE CONSTITUTION WAS RAISED AND I MMUNITY FROM UNION TAXATION THEREUNDER WAS CLAIMED BY THE ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION, AND ON AN EXAMINATION OF THE RELEVANT PROVISIONS OF THE ROAD TRANSPORT CORPORATION ACT, 1950, UNDER WHICH THE ANDHRA PRADESH STATE ROA D TRANSPORT CORPORATION WAS CONSTITUTED THE COURT CAME TO THE CONCLUSION THAT T HE TRADING OR BUSINESS ACTIVITY THAT WAS BEING CARRIED ON BY THE ANDHRA PRADESH STATE RO AD TRANSPORT CORPORATION WAS NOT CARRIED ON BY THAT CORPORATION EITHER AS DEPART MENT OF THE STATE GOVERNMENT OR AS AN AGENT ON BEHALF OF THE STATE GOVERNMENT, BUT THE CORPORATION INDULGED IN CONCERNED TRADE OR BUSINESS ACTIVITY ON ITS OWN AND IT WAS HELD THAT THE IMMUNITY CLAIMED BY THAT CORPORATION UNDER ARTICLE 289(1) OF THE CONSTITUTION WAS NOT AVAILABLE TO IT. IN THAT CASE THERE WERE PROVISIONS OF THAT A CT WHICH SHOWED THAT THE BULK OF THE CAPITAL NECESSARY FOR THE ESTABLISHMENT OF THE CORP ORATION HAD BEEN CONTRIBUTED BY THE STATE GOVERNMENT, A SMALL PORTION BY THE CENTRA L GOVERNMENT AND A FEW SHARES WERE HELD BY SOME INDIVIDUALS; THE PROVISIONS OF TH E ACT ALSO INDICATED THAT THE ACTIVITY OF THE CORPORATION WAS CONTROLLED BY THE S TATE AND IN PARTICULAR THERE WAS A PROVISION TO BE FOUND IN SECTION 30 OF THE ACT FOR MAKING OVER SURPLUS RECEIPTS TO THE STATE GOVERNMENT AFTER DISBURSEMENTS INDICATED IN S ECTIONS 28 AND 29 HAD BEEN MADE AND, NOTWITHSTANDING THESE FEATURES, WHICH EME RGED FROM THE PROVISIONS OF THE ROAD TRANSPORT CORPORATIONS ACT, 1950, THE SUPREME COURT TOOK THE VIEW THAT THE OTHER FEATURES EMERGING FROM THE EXAMINATION OF THE OTHER PROVISIONS OF THE ACT SHOWED THAT THE ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION WAS A DISTINCT STATUTORY CORPORATION AND THE PROPERTY AND INCOME T HEREOF WERE NOT THE PROPERTY AND THE INCOME OF THE STATE GOVERNMENT AND AS SUCH THE IMMUNITY FROM UNION TAXATION UNDER ARTICLE 289(1) OF THE CONSTITUTION COULD NOT BE CLAIMED BY THAT CORPORATION. IT IS TRUE THAT SOME DISTINGUISHING FEATURES WOULD BE NOTICED IF THE PROVISIONS OF THE MADHYA PRADESH HOUSING BOARD ACT, 1950, ARE EXCLAIM ED IN THE CONTEXT OF THE PROVISIONS WHICH OBTAINED IN THE ROAD TRANSPORT COR PORATIONS ACT, 1950, BUT, IN OUR 61 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. VIEW, THE DISTINGUISHING FEATURES WHICH WERE POINTE D OUT BY MR. THAKAR COULD NOT BE REGARDED AS HAVING ANY BEARING ON THE QUESTION WHIC H IS REQUIRED TO BE CONSIDERED IN THIS CASE BY US; FOR EXAMPLE, IT WAS POINTED OUT BY MR. THAKAR THAT WHEREAS UNDER THE ROAD TRANSPORT CORPORATIONS ACT, 1950, THERE WA S PROVISION FOR RAISING A SHARE CAPITAL WHICH COULD BE SUBSCRIBED BY PRIVATE INDIVI DUALS, THERE WAS NOT SUCH PROVISION FOR RAISING ANY SHARE CAPITAL FOR THE PETITIONER-HO USING BOARD, UNDER THE MADHYA PRADESH HOUSING BOARD ACT, 1950; IT WAS ALSO POINTE D OUT THAT THERE WAS A GLARING DIFFERENCE BETWEEN THE NATURE OF ACTIVITY UNDERTAKE N BY THE ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION AND THE NATURE OF ACTIVI TY UNDERTAKEN BY THE PETITIONER- BOARD, AS, FOR INSTANCE, THE ACTIVITY UNDERTAKEN BY THE FORMER ENTITY WAS IN THE NATURE OF TRADING ACTIVITY, WHILE THE ACTIVITY UNDE RTAKEN BY THE PETITIONER-BOARD COULD NOT BE REGARDED AS ANY TRADING ACTIVITY IN ANY SENS E OF THE TERM; FURTHER, IT WAS POINTED OUT THAT SINCE PROFIT MOTIVE WAS ABSENT IN THE INSTANT CASE BEFORE US, THERE WAS NO QUESTION OF MAKING ANY PROVISION FOR MAKING OVER SURPLUS RECEIPTS TO THE STATE GOVERNMENT WHICH WAS FEATURE WHICH APPEARED C LEAR UNDER SECTION 30 OF THE ROAD TRANSPORT CORPORATIONS ACT, 1950. IN THE FIRST PLACE, IN SPITE OF THE AFORESAID PECULIAR FEATURES WHICH OBTAINED UNDER THE ROAD TRA NSPORT CORPORATIONS ACT, 1950, THE SUPREME COURT TOOK THE VIEW THAT THE A. P. STAT E ROAD TRANSPORT CORPORATION WAS DISTINCT ENTITY. SECONDLY, AS STATED EARLIER, T HE DISTINGUISHING FEATURES MENTIONED BY MR. THAKAR MAY BE RELEVANT ON THE POINT OF ATTRA CTING THE EXEMPTION UNDER SECTION 4(3)(I) AND NOT ON THE ISSUE WHICH HAS BEEN RAISED. THE PRINCIPAL QUESTION INVOLVED BOTH IN THAT DECISION AS WELL AS IN THE CA SE BEFORE US HAS BEEN WHETHER THE INCOME AND THE PROPERTY OF THE BOARD COULD BE REGAR DED AS THE INCOME AND PROPERTY OF THE STATE GOVERNMENT AND ON THAT QUESTION THE PR OVISIONS OF THE MADHYA PRADESH HOUSING BOARD ACT, 1950, ESPECIALLY PROVISIONS OF S ECTIONS 3, 4, 12 AND 14, CLINCHINGLY INDICATE THAT THE PETITIONER-BOARD CANN OT BE REGARDED AS DEPARTMENT OR AN AGENT OF THE STATE GOVERNMENT AND WILL HAVE TO BE R EGARDED AS SEPARATE LEGAL ENTITY DISTINCT FROM THE STATE GOVERNMENT, AND, THEREFORE, THE INCOME AND PROPERTY OF THE BOARD COULD NOT BE REGARDED AS THE INCOME AND THE P ROPERTY OF THE STATE GOVERNMENT. IN OTHER WORDS, THE RELEVANT PROVISIONS CONCERNING A PARTICULAR ENTITY ESTABLISHED UNDER A PARTICULAR ENACTMENT WOULD HAVE TO BE CONSIDERED FOR DECIDING THE QUESTION AND, IN OUR VIEW, AS STATED EARLIER, T HE PROVISIONS OF THE MADHYA PRADESH HOUSING BOARD ACT, 1950, CLEARLY INDICATE T HAT THE BOARD, ITS PROPERTY AND INCOME CANNOT BE REGARDED AS PROPERTY AND INCOME OF THE STATE GOVERNMENT. IN THIS VIEW OF THE MATTER, WE FEEL THAT THE PRINCIPLE ENUN CIATED IN THE SUPREME COURT'S DECISION IN THE CASE OF ANDHRA PRADESH STATE ROAD T RANSPORT CORPORATION, WOULD BE APPLICABLE TO THE INSTANT CASE BEFORE US AND ON AN ANALYSIS OF THE PROVISIONS OF THE CONCERNED ACT BEFORE US, WE HAVE COME TO THE CONCLU SION THAT THE PROPERTY AND INCOME OF THE BOARD IS NOT THE PROPERTY AND INCOME OF THE STATE GOVERNMENT. MR. THAKAR'S CONTENTION, THEREFORE, MUST FAIL. 44. FACTS BEING IDENTICAL, THE RATIO LAID DOWN AS A BOVE CLEARLY APPLIES TO THE ASSESSEE. THE ASSESSEES CONTENTION THAT THE INCOME OF THE BOARD CANNOT BE 62 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. SUBJECTED TO TAX UNDER THE INCOME-TAX ACT, IN VIEW OF THE PROVISIONS CONTAINED UNDER ARTICLE 289(1) OF CONSTITUTION OF INDIA IS NO T ACCEPTABLE. FOR THE SAME REASON, THE ASSESSEES CONTENTION THAT IT ACTED AS AN AGENT OF THE STATE GOVERNMENT IS ALSO TENABLE. NO MATERIAL HAS BEEN PL ACED ON RECORD THAT A RELATIONSHIP OF AGENCY EXISTS BETWEEN THE STATE GOV ERNMENT AND THE APHB. ON THE CONTRARY, THE PROVISIONS OF THE APHB ACT AS WEL L AS THE OTHER MATERIALS ON RECORD CLEARLY ESTABLISHES THE FACT THAT THE ASSESS EE APHB UNDERTAKES THE HOUSING ACTIVITY AS A COMMERCIAL VENTURE NOT AS AN AGENT OF THE STATE BUT INDEPENDENTLY. THEREFORE, THE INCOME DERIVED FROM S ALE OF HOUSING PROJECT WOULD CERTAINLY BE THE INCOME OF THE ASSESSEE BOARD AND N OT OF THE STATE GOVERNMENT. FURTHERMORE, IN CASE OF A PRINCIPAL AND AGENT RELAT IONSHIP, THE AGENT IS ENTITLED FOR CERTAIN COMMISSION FOR THE SERVICES RENDERED BY IT. IN THE PRESENT CASE, THERE IS NO SUCH CONSIDERATION FOR WHICH THE APHB A CTS AS AN AGENT OF THE STATE GOVERNMENT FOR CARRYING OUT THE HOUSING SCHEMES OF THE STATE GOVERNMENT. ONLY BECAUSE SUB-SECTION (7) TO SECTION 58 WAS BROU GHT INTO THE APHB ACT BY WAY OF AN AMENDMENT IN 2010 GIVING RETROSPECTIVE EF FECT FROM 2002, WHICH PROVIDED FOR VESTING OF THE SURPLUS FUND IN CONSOLI DATED FUND OF THE STATE GOVERNMENT IT CANNOT BE SAID THAT THE INCOME EARNED BY THE ASSESSEE IS ACTUALLY THE INCOME OF THE STATE GOVERNMENT. IN FACT A SIMIL AR PROVISION U/S 30 OF THE APSRTC ACT, PROVIDED FOR VESTING OF THE SURPLUS FUN D WITH THE STATE GOVT. IN SPITE OF SUCH PROVISION, THE HONBLE SUPREME COURT HELD THAT APSRTC IS A DISTINCT STATUTORY CORPORATION AND THE PROPERTY AND INCOME OF APSRTC IS NOT THE INCOME OF THE STATE. 45. THE CHARGEABILITY OF THE INCOME TO TAX IS AS PE R THE CHARGING SECTION CONTAINED U/S 4 OF THE IT ACT, 1961. THE RE TROSPECTIVE AMENDMENT MADE TO THE APHB ACT BY ACT 12 OF 2010 CA NNOT DILUTE THE EFFECT OF THE PROVISIONS CONTAINED UNDER THE INCOME -TAX ACT, WHICH IS AN ACT OF THE PARLIAMENT HENCE HAS OVERRIDING EFFECT O VER AN ACT OF THE STATE LEGISLATURE. IT IS A FACT ON RECORD THAT THE PLEA TAKEN BY THE ASSESSEE THAT BOARDS INCOME IS THE INCOME OF THE S TATE GOVERNMENT WAS NOT THERE UNTIL INTRODUCTION OF SUB-SECTION (7) TO SECTION 58 OF THE APHB ACT IN 2010. THAT IS THE REASON THE ASSESSEE HAD NE VER TAKEN THIS STAND ALL THESE YEARS. IN FACT THE ASSESSEE HAD ALL ALONG FILED RETURNS DECLARING INCOME AND CLAIMING DEDUCTION U/S 80-IB OF THE ACT. DEDUCTION U/S 80-IB 63 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. CAN ONLY BE CLAIMED BY AN ASSESSEE WHO IS AN INDUST RIAL UNDERTAKING HAVING INCOME FROM PROFITS AND GAINS FROM BUSINESS SPECIFIED THEREIN. THEREFORE, ASSESSEES OWN CONDUCT GOES TO SHOW THAT THE INCOME FROM HOUSING PROJECTS WERE TREATED AS BUSINESS BY THE AS SESSEE. THE ASSESSEE HAS NOT REVISED THIS STAND BY FILING ANY REVISED RE TURN. ONLY AFTER THE AMENDMENT WAS MADE TO THE APHB ACT IN THE YEAR 2010 , THE ASSESSEE CAME FORWARD WITH A CLAIM THAT ITS INCOME IS THE IN COME OF THE STATE GOVERNMENT THEREFORE IMMUNE FROM INCOME-TAX ACT IN VIEW OF THE ARTICLE 289(1) OF THE CONSTITUTION OF INDIA. AS HAS BEEN H ELD BY THE HONBLE SUPREME COURT IN CASE OF APSRTC V/S. ITO (SUPRA) WHICH WAS SUBSEQUENTLY APPROVED BY THE CONSTITUTION BENCH DEC ISION OF THE HONBLE SUPREME COURT IN CASE OF NEW DELHI MUNICIPAL COUNCI L V/S. STATE OF PUNJAB [1997] 7 SCC 339 AND FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN CASE OF VIDARBHA HOUSING BOARD V/S. ITO (SUPRA) , IMMUNITY UNDER ARTICLE 289 OF THE CONSTITUTION IS SUBJECT TO FULFI LLMENT OF THE CONDITIONS LAID DOWN IN SUB-CLAUSES (1), (2) & (3) OF ARTICLE 289 WHICH ARE INTERRELATED. AS PER ARTICLE 289, ONLY INCOME OR PR OPERTY OF THE STATE CANNOT BE TAXED UNDER ANY OTHER LAW. 46. AS CAN BE SEEN FROM THE FACTS ON RECORD THE ASS ESSEE IS HAVING ITS DISTINCT AND SEPARATE IDENTITY FROM THE STATE GOVER NMENT, HENCE, IT CANNOT CLAIM IMMUNITY UNDER ARTICLE 289 OF THE CONS TITUTION OF INDIA. THAT BESIDES BOTH THE AO AS WELL AS THE CIT(A) HAVE OBSERVED THAT THE ASSESSEE BOARD IS PAYING TAXES AND DUTIES TO THE ST ATE GOVERNMENT WHEREVER IT IS DUE. THIS FINDING HAS NOT BEEN CONTR OVERTED BY THE ASSESSEE. THAT BEING, THE CASE THE ASSESSEE IS ALSO REQUIRED TO DISCHARGE ITS LIABILITY UNDER THE INCOME TAX ACT. EVEN SECTIO N 58(7) CANNOT BE CONSTRUED IN A MANNER TO MEAN THAT THE INCOME OF TH E BOARD IS THE INCOME OF THE STATE. ON THE CONTRARY, WHAT SUB-SECT ION (7) OF SECTION 58 SAYS THAT AFTER MEETING ALL EXPENDITURES, THE SURPL US REVENUE SHALL VEST WITH THE CONSOLIDATED FUND OF THE STATE GOVERNMENT, BUT, THAT DOES NOT MAKE THE INCOME OF THE BOARD THE INCOME OF THE STAT E GOVERNMENT. THE LEARNED AR HAS RELIED UPON A NUMBER OF DECISIONS OF THE APEX COURT IN HIS SUBMISSIONS. HOWEVER, IN NONE OF THE DECISIONS, THE RATIO LAID DOWN IS IN THE CONTEXT OF CHARGEABILITY OF INCOME UNDER THE INCOME-TAX ACT 64 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. VIS--VIS ARTICLE 289(1) OF THE CONSTITUTION OF IND IA. THEREFORE, THOUGH THERE IS NO DISPUTE WITH REGARD TO THE RATIO LAID D OWN IN THOSE DECISIONS, HOWEVER, THEY ARE NOT APPLICABLE TO THE FACTS OF TH E CASE OF THE ASSESSEE. IT WILL BE PERTINENT TO MENTION HERE THAT THE LEARN ED AR PLACED STRONG RELIANCE UPON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF HOUSING BOARD OF HARYANA VS. HARYANA HOUSING BOARD EMPLOYEE S UNION AND OTHERS [1996] 1 SCC 95. IN THIS CONTEXT, THE LEARNE D AR DRAWING A PARALLEL BETWEEN THE PROVISIONS OF HARYANA HOUSING BOARD ACT, 1971 AND APHB ACT, 1956 SUBMITTED THAT THE HONBLE SUPREME C OURT ON CONSIDERING THE PROVISIONS OF HARYANA HOUSING BOARD ACT HAS HELD THAT THE CONTROL OF THE GOVERNMENT IS SO PERVASIVE THAT THE BOARD DOES NOT HAVE EVEN A SEMBLANCE OF INDEPENDENCE. IT WAS SUBMI TTED THAT IN ASSESSEES CASE ALSO DUE TO THE CONTROL OF THE STAT E GOVERNMENT THE ASSESSEE DOES NOT HAVE ANY INDEPENDENT EXISTENCE. T HE AFORESAID DECISION OF THE HONBLE APEX COURT IS NOT APPLICABL E TO THE ASSESSEE FIRSTLY BECAUSE THE OBSERVATION MADE BY THE HONBLE SUPREME COURT WAS IN THE CONTEXT OF WHETHER HARYANA HOUSING BOARD IS A LOCAL AUTHORITY AND SECONDLY THE HONBLE SUPREME COURT WAS NOT CONSIDER ING THE ISSUE WHETHER INCOME OF THE BOARD IS THE INCOME OF THE ST ATE GOVERNMENT. ON THE OTHER HAND, THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF APSRTC VS. ITO (SUPRA) AND OF THE HONBLE BOMBAY HI GH COURT IN CASE OF VIDARBHA HOUSING BOARD VS. ITO (SUPRA) ARE DIRECTLY ON THE ISSUE. IN AFORESAID VIEW OF THE MATTER, WE HOLD THAT ASSESSEE S INCOME CANNOT BE HELD TO BE THE INCOME OF THE STATE AND AS SUCH CANN OT BE EXEMPT FROM TAXATION UNDER ARTICLE 289 OF THE CONSTITUTION OF I NDIA. AS A COROLLARY THE INCOME EARNED IS THE INCOME OF THE ASSESSEE BOARD A ND AS SUCH IS ASSESSABLE AT ITS HANDS ONLY. 47. DIVERSION OF INCOME BY OVERRIDING TITLE THE ASSESSEE IN HIS WRITTEN SUBMISSIONS HAS ALSO TA KEN THE PLEA THAT THERE BEING DIVERSION OF INCOME BY OVERRI DING TITLE THE INCOME CANNOT BE TAXED AT THE HANDS OF THE ASSESSEE . IN THIS REGARD, THE ASSESSEE HAS SUBMITTED AS UNDER: 65 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. IN THE WRITTEN SUBMISSION OF THE ORIGINAL GROUNDS, AS ALSO IN THE WRITTEN SUBMISSIONS IN THE ADDITIONAL GROUNDS, THE APPELLANT HAD ARGUED THAT THE INCOME OF APHB IS DIV ERTED TO THE GOVERNMENT OF ANDHRA PRADESH BY OVERRIDING TITL E AND IS NEVER A PART OF ITS TAXABLE INCOME. THE CIT(A) HAS REFERRED TO SECTION 58(7) OF THE ANDHRA PRADESH HOUSING BOARD A CT, WHICH MANDATES THAT SURPLUS NET REVENUE AFTER MEETI NG THE EXPENDITURE OF APHB SHALL VEST IN THE CONSOLIDATED FUND OF THE ANDHRA PRADESH, AND THAT SUCH SURPLUS NET REVENUE S HALL BE TRANSFERRED TO THE STATE GOVERNMENT ON QUARTERLY BA SIS, AS THE STATE GOVERNMENT FROM TIME TO TIME MAY INSTRUCT OR ADVISE APHB. THE CIT(A) HAS HELD THAT STATE ACT CAN NOT OVERRIDE THE CENTRAL ENACTMENT IN INCOME TAX ACT. T HEREFORE, THE ABOVE PROVISIONS SHOULD BE INTERPRETED THAT THE SURPLUS REVENUE AFTER MEETING ALL EXPENDITURE INCLUDING INC OME TAX CAN ALONE BE TRANSFERRED TO THE GOVERNMENT OF ANDHRA PRADESH. WHILE DEALING WITH THIS ISSUE, THE CIT(A) HAS COMPLETELY OVERLOOKED THE FOLLOWING RULINGS CITED B Y THE APPELLANT IN THE REJOINDER AND WRITTEN SUBMISSION O N THE ORIGINAL GROUNDS. IN CIT VS. SITALDAS'IIRATHDAS (1961) 41 I TR 367 (SC) AND MOTILAL CHHADAMILAL JAIN V. CFT [1991J 190 ITR 1 (SC) , THE SUPREME COURT HAS HELD THAT WHERE THE OBLIGATION IS NOT SELF-IMPOSED OR GRATUITOUS, AND I T FLOWS OUT OF AN ANTECEDENT AND INDEPENDENT TITLE, IT WILL CON STITUTE DIVERSION OF INCOME BY OVERRIDING TITLE. IN CFT VS. NIZAM SUGAR FACTORY LTD. (2002) 253 FTR 68 (AP), UNDER MOLASSES CONTROL ORDER, 1972, ONE THIRD OF THE SALE PRICE OF MOLASSES WAS REQUIRED TO BE SET APART FROM CONSTRUCTION OF S TORAGE TANKS. THE AMOUNT WAS CLAIMED BY THE ASSESSEE AS NO T TAXABLE HAVING BEEN DIVERTED BY OVERRIDING TITLE UN DER THE AUTHORITY OF THE LAW. THE HIGH COURT FOUND THAT THE ASSESSEE HAD NO CONTROL OVER THE FUND, AND THE SAME WAS DIVE RTED FROM THE SOURCE AND DID NOT REACH IT. THEREFORE, IT WAS NOT TAXABLE. SIMILAR VIEW WAS TAKEN IN THE FOLLOWING CASES: SOMAIYAORGENO-CHEMICALS LTD. VS. CIT (1995) 216 ITR 291 CIT VS. NEW HORIZON SUGAR MILLS (P) LTD. (2003) 128 TAXMAN 300 (MAD) : (2000) 244 ITR 738 (MAD) COMMISSIONER OF' INCOME- TAX VS. PANDAVAPURASAHAKARASAKKAREKHARKANE LTD, (1992) 198 ITR 690 (KAR.) IN CIT VS. NEW HORIZON SUGAR MILLS P. LTD., (2004) 269 ITR 397 (SC) AND CIT VS. AMBUR CO-OP. SUGAR MILLS LTD., (2004) 269 ITR 398 (SC), THE SUPREME COURT HAS DISMISSED CIVIL APPEALS BY TH E 66 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. REVENUE ON THIS ISSUE. IT SHOULD BE NOTED THAT IN ALL THESE CASES, THERE WAS NO PLEA THE AMOUNT WAS TAXABLE ON THE GROUND THAT INCOME TAX AC T WILL PREVAIL OVER THE MOLASSES CONTROL ORDER. INCOME TAX LAW APP LIES TO INCOME RECOGNISED BY THE ABOVE PRINCIPLE CONSIDERED BY THE COURT. THE CIT(A) SHOULD NOT HAVE IGNORED THE IMPORTANCE OF TH ESE RULINGS ON THE PLEA TAKEN BY THE APPELLANT ON THE ISSUE OF DIV ERSION OF INCOME BY OVERRIDING TITLE. 48. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUB MITTED THAT THERE IS NO DIVERSION OF INCOME BY OVERRIDING TITLE AS TH E INCOME HAS ALREADY ACCRUED TO THE ASSESSEE BOARD AND AFTER MEETING ITS EXPENDITURE WHATEVER SURPLUS REVENUE REMAINS IS TRANSFERRED TO CONSOLIDATED FUND OF THE STATE GOVERNMENT OF AP. THEREFORE, IT IS ONLY AN APPLICATION OF INCOME AFTER ITS ACCRUAL TO THE ASSESSEE. 49. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES ON THIS ISSUE. FROM THE FACTS ON RECORD, IT IS QUITE OBVIOU S THAT THE INCOME ACCRUES TO THE ASSESSEE. SECTION 58(4) OF APHB ACT IS VERY CLEAR ON THIS ASPECT, WHICH READS AS UNDER: ALL MONEYS RECEIVED BY OR ON BEHALF OF THE BOARD BY VIRTUE OF THIS ACT, ALL PROCEEDS OF LAND OR ANY OTHER KIND OF PROP ERTY SOLD BY THE BOARD, ALL RENTS, BETTERMENT CHARGES AND ALL INTERE ST, PROFITS AND OTHER MONEYS ACCRUING TO THE BOARD SHALL CONSTITUTE THE FUND OF THE BOARD. 50. IT MAY BE A FACT THAT BY THE OPERATION OF SECTI ON 58(7) OR BY WAY OF GOVERNMENT DIRECTIVE THE SURPLUS INCOME OR SOME FUN D HAS BEEN DIVERTED TO THE CONSOLIDATED FUND OF THE STATE GOVERNMENT OR ANY OTHER GOVERNMENT CORPORATION, BUT, THAT BY NO MEANS WOULD AMOUNT TO DIVERSION OF INCOME BY OVERRIDING TITLE. SECTION 58 (7) OF THE APHB ACT, WHICH WAS BROUGHT TO THE APHB ACT IN 2010 WITH RETR OSPECTIVE EFFECT FROM 01/04/2002 READS AS UNDER: (7) NOW WITHSTANDING ANYTHING CONTAINED IN SUBSECTI ONS (1), (4) AND (5) OF THIS SECTION, THE SURPLUS NET REVENUE AF TER MEETING THE EXPENDITURE OF THE BOARD SHALL VEST IN CONSOLIDATED FUND OF THE STATE OF ANDHRA PRADESH. SUCH SURPLUS REVENUE SHALL BE TRANSFERRED 67 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. TO THE STATE GOVERNMENT OF ANDHRA PRADESH INTO SUCH ACCOUNT ON QUARTERLY BASIS, AS THE STATE GOVERNMENT FROM TIME TO TIME INSTRUCT OR ADVICE THE BOARD IN THIS BEHALF. AS AMENDED BY A CT NO. 12 OF 2010 AND PROVISIONS SHALL BE DEEMED TO HAVE COME IN TO FORCE WITH EFFECT FROM 1 ST APRIL, 2002. 51. A READING OF THE AFORESAID PROVISION WOULD MAKE IT CLEAR THAT ONLY AFTER ACCRUAL OF INCOME TO THE ASSESSEE AND AFTER M EETING ALL ITS EXPENDITURE THE SURPLUS NET REVENUE SHALL VEST IN C ONSOLIDATED FUND OF THE GOVERNMENT. IT FURTHER PROVIDES THAT SUCH SURPL US REVENUE SHALL BE TRANSFERRED TO THE STATE GOVERNMENT OF AP ON QUARTE RLY BASIS AS PER THE INSTRUCTION OR ADVICE OF THE GOVERNMENT. THEREFORE, SO FAR AS THE ACCRUAL OF INCOME IS CONCERNED, THERE IS NO DISPUTE TO THE FACT THAT THE INCOME HAS ALREADY ACCRUED TO THE ASSESSEE. ONLY AFTER THE ACCRUAL OF INCOME TO THE ASSESSEE THE SURPLUS HAS BEEN DIVERTED TO THE G OVERNMENT ACCOUNT. THE HONBLE SUPREME COURT IN CASE OF CIT V/S. SRI S ITALDAS TIRATHDAS, 41 ITR 367 (SC) HELD AS FOLLOWS: THERE IS A DIFFERENCE BETWEEN AN AMOUNT WHICH A PER SON IS OBLIGED TO APPLY OUT OF HIS INCOME AND AN AMOUNT WHICH BY THE NATURE OF THE OBLIGATION CANNOT BE SAID TO BE A PART OF THE INCOME OF THE AS SESSEE. WHERE BY THE OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE, IT IS DEDUCTIBLE; BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO D ISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSESSEE, THE SAME CO NSEQUENCE, IN LAW, DOES NOT FOLLOW. IT IS THE FIRST KIND OF PAYMENT WH ICH CAN TRULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY ANOTHER A PORTION OF ONE'S OWN INCOME, WHICH HAS BE EN RECEIVED AND IS SINCE APPLIED. THE FIRST IS A CASE IN WHICH THE INCOME NE VER REACHES THE ASSESSEE, WHO EVEN IF HE WERE TO COLLECT IT, DOES SO, NOT AS PART OF HIS INCOME, BUT FOR AND ON BEHALF OF THE PERSON TO WHOM IT IS PAYABLE. 52. THE SAME PRINCIPLE HAS ALSO BEEN REITERATED IN OTHER DECISIONS RELIED UPON BY THE ASSESSEE. THEREFORE, CONSIDERING THE PR INCIPLES LAID DOWN IN THE AFORESAID DECISION THE ASSESSEE HAVING DIVERTED A PART OF THE INCOME AFTER IT HAS ACCRUED TO IT THE DIVERSION OF SUCH IN COME CAN ONLY BE CONSIDERED TO BE AN APPLICATION OF INCOME AND NOT D IVERSION OF INCOME BY OVERRIDING TITLE. THEREFORE, WE ARE UNABLE TO ACCEP T THE CONTENTION OF THE 68 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. ASSESSEE, WHICH IS ACCORDINGLY REJECTED. IN THE RES ULT, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. 53. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF INFRASTRUCTURE EXPENDITURE AMOUNTING TO RS. 1180 CRORES. THIS ISSU E IS COMMON TO ASSESSMENT YEARS 2006-07 AND 2008-09. 54. THE ASSESSEE IN ITS WRITTEN SUBMISSIONS HAS SUBMITTED AS UNDER: THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE E XPENDITURE IN QUESTION WAS NOT AN ALLOWABLE BUSINESS EXPENDITU RE. UNDER GOVT. ORDER, APHB HAD REMITTED RS.1180 CRORES TO A. P. STATE HOUSING CORPORATION WHO WAS TO PROVIDE INFRASTRUCTU RE FACILITIES ON THE LAND ASSIGNED TO THE APPELLANT. [ THE APPELLANT HAD SIMILARLY TRANSFERRED RS.285 CRORERS IN A.Y. 20 06-07.] THE LAND ASSIGNED BY A.P. GOVT. WAS HELD BY APHB, ON WH ICH A.P. STATE HOUSING CORPORATION WAS TO PROVIDE HOUSING AN D INFRASTRUCTURE FACILITIES TO THE RESIDENTS OF THE S TATE, MAINLY BELONGING TO LOWER AND MIDDLE INCOME GROUPS. SINCE INCEPTION OF APHB, GOVT. OF A.P. HAS BEEN ALLOTTING/ASSIGNING LAND WITHOUT OR AT NOMINAL COST WHICH WAS USED FOR CONST RUCTING AND PROVIDING HOUSING ACCOMMODATION TO THE PUBLIC. THIS WAS THE FIRST TIME THAT THE GOVT. HAD DEMANDED PAYMENT OF WHICH WAS COMPLIED WITH. THE APPELLANT IS A WHOLLY OWNED GOVERNMENT ORGANIZATION AND IT IS TO OBEY THE DICTA TES OF ITS MASTER. THE PURPOSE OF THE EXPENDITURE IS WITHIN TH E MANDATE OF THE APPELLANT. UNLESS IT CARRIES OUT THE ORDERS OF ITS SOLE OWNER, THE STATE GOVERNMENT, ITS BUSINESS WILL BE I N JEOPARDY. THE APPELLANT IS NOT A COMMERCIAL ORGANIZATION BUT DEVELOPMENTAL ORGANIZATION. ITS STRUCTURE AND FUNCT ION ARE LIKE THAT OF THE GOVERNMENT THOUGH GIVEN A SEPARATE SHAPE. GENERATION OF SOME SURPLUS IN COURSE OF ITS OPERATI ON DOES NOT NECESSARILY MAKE THIS WHOLLY OWNED GOVERNMENT BODY AN ORGANIZATION WITH PROFIT MOTIVE. THIS ASPECT HAS AL SO BEEN EXPLAINED IN DETAIL IN THE REJOINDER ON THE REMAND REPORT OF A.O. WITH SUPPORTIVE CASE LAWS. FUNDING OF THE INFR ASTRUCTURE CREATED BY THE A.P. STATE HOUSING CORPORATION AT TH E BEHEST OF STATE GOVERNMENT IS INCIDENTAL TO THE MAIN ACTIVITY OF THE APPELLANT. IT DID DIRECTLY BENEFIT FROM THIS EXPEND ITURE AS SUCH INFRASTRUCTURE WAS MEANT FOR THE HOUSES SOLD BY IT. ITS EXISTENCE AND PURPOSE ARE SERVED AS LONG AS IT PLAY S DIRECT OR INDIRECT ROLE IN DEALING WITH AND SATISFYING THE NE ED OF HOUSING ACCOMMODATION IN THE STATE. THE EXPENDITURE IN QUESTION IS IN COURSE OF ITS NORMAL BUSINESS OPERAT ION WHICH, THOUGH, HAD NOT TAKEN PLACE PREVIOUSLY. THE APPELLA NT IS 69 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. WORKING IN A DYNAMIC SOCIO-ECONOMIC ENVIRONMENT AND KEEPING IN VIEW THE CHANGING NEED THE NECESSITY OF SUCH EXPENDITURE HAD ARISEN. IN THE EARLIER PROCEEDINGS, THE A.O. AND CIT(A) HAV E WRONGLY CONCLUDED THAT THE AMOUNT PAID TO A.P. STATE HOUSIN G CORPORATION UNDER THE ORDER OF THE STATE GOVERNMENT WAS CAPITAL EXPENDITURE. DEVELOPMENT OF HOUSING FACILIT Y IS THE PURPOSE FOR WHICH THE APPELLANT HAS BEEN CONSTITUTE D. THE STATE GOVERNMENT HAS SET UP SEVERAL EXECUTING AGENC IES TO PROVIDE HOUSING ACCOMMODATION AND CREATE HOUSING INFRASTRUCTURE. IT IS THE ULTIMATE DECISION MAKING AUTHORITY AS TO WHICH AGENCY IS TO EXECUTE WHICH WORK FOR THI S PURPOSE. THE STATE GOVERNMENT, IN ITS WISDOM, HAD D ECIDED THAT CERTAIN HOUSING INFRASTRUCTURE FACILITIES ARE TO BE DEVELOPED BY A.P. STATE HOUSING CORPORATION, AND TH AT THE APPELLANT WOULD TRANSFER THE STIPULATED AMOUNT TO T HE CORPORATION FOR THIS PURPOSE. THEREFORE, THE PURPOS E FOR WHICH THE AMOUNT IS TO BE SPENT IS VERY MUCH CONNEC TED WITH THE ACTIVITIES UNDERTAKEN BY THE APPELLANT. IN LAKSHMIJI SUGAR MILLS CO. P. LTD. VS. CIT (1971) 82 ITR 376 (SC), THE ASSESSEE WAS A PRIVATE COMPANY, CARRYING ON THE BUSINESS OF MANUFACTURING AND SALE OF SUGAR, PA ID TO THE CANE DEVELOPMENT COUNCIL CERTAIN AMOUNTS BY WAY OF CONTRIBUTION FOR THE CONSTRUCTION AND DEVELOPMENT O F ROADS BETWEEN THE VARIOUS SUGARCANE PRODUCING CENTRES AND THE SUGAR FACTORIES OF THE ASSESSEE. THIS EXPENDITURE W AS INCURRED UNDER AN OBLIGATION TO MAKE THE AFORESAID CONTRIBUTION UNDER THE PROVISIONS OF U'P. SUGARCANE REGULATION OF SUPPLY AND PURCHASE ACT, 1953. THE RO ADS REMAINED THE PROPERTY OF THE GOVERNMENT AND THERE W AS NO FINDING THAT THE ASSESSEE WOULD GET AN ENDURING BEN EFIT FROM THOSE ROADS. THE SUPREME COURT HELD THAT APART FROM THE ELEMENT OF COMPULSION, THE DEVELOPMENT OF ROADS FAC ILITATES THE BUSINESS AND THE EXPENDITURE WAS REVENUE IN NAT URE. IN L.H. SUGAR FACTORY AND OIL MILLS (P.) LTD. VS. CIT, (198 0) 1251TR 293 (SC), THE ASSESSEE HAD CONTRIBUTED TOWARDS COST OF CONSTRUCTION OF ROADS IN THE AREA AROUND THE FAC TORY. THE ARGUMENT OF THE REVENUE WAS THAT THE NEWLY CONSTRUC TED ROADS, THOUGH NOT BELONGING TO THE ASSESSEE, BROUGH T TO THE ASSESSEE AN ENDURING ADVANTAGE FOR THE BENEFIT OF I TS BUSINESS AND, THEREFORE, THE EXPENDITURE WAS CAPITA L IN NATURE. REJECTING THIS ARGUMENT, THE SUPREME COURT HELD THAT IT IS NO DOUBT TRUE THAT THE ADVANTAGE SECURED FOR THE BUSINESS WAS OF A LONG DURATION, BUT IT WAS NOT AN ADVANTAGE IN THE CAPITAL FIELD, BECAUSE NO TANGIBLE OR INTANG IBLE ASSET 70 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. WAS ACQUIRED BY THE ASSESSEE, NOR THERE WAS ANY ADD ITION TO OR EXPANSION OF THE PROFIT MAKING APPARATUS OF THE ASSESSEE. IN CIT VS. COATS VIYELLA INDIA LTD. (2002) 253 ITR 667 (MAD.), THE ASSESSEE HAD MADE PAYMENT TO THE GOVERNMENT FOR CONSTRUCTION OF NEW BRIDGE, PROVIDING ACCESS TO THE ASSESSEE'S FACTORY FOR ITS WORKMEN AND MOVEMENT OF GOODS. THE HIGH COURT HELD THAT THE ASSESSEE DID NOT ACQUI RE ANY OWNERSHIP OVER THE BRIDGE AND THERE WAS NO ADDITION TO THE VALUE OF THE ASSETS OWNED BY IT. THEREFORE, THE PAY MENT MADE TO THE GOVERNMENT WAS REVENUE EXPENDITURE. IN NAVSARI COTTON AND SILK MILLS LTD. (1982) 135 ITR 546 (GUJ.), THE ASSESSEE DISCHARGED AN EFFLUENT CAUSING HEALTH HAZARD, WHICH WAS PROTESTED BY THE CITIZENS OF THE AREA. APPREHENDING A SPATE OF SUITS THEREFROM, AND IN VIE W OF THE MUNICIPALITY BEING UNABLE TO REMEDY THE SITUATION, AND PREVENT LITIGATION, THE ASSESSEE MADE CONTRIBUTION TO THE MUNICIPALITY FOR PROVIDING UNDERGROUND PIPELINE THR OUGH THE MUNICIPAL LAND FOR DISPOSAL OF EFFLUENTS. IT WAS AR GUED THAT THE PURPOSE OF THIS EXPENDITURE WAS TO AVOID LOSING MARKET, CUSTOMERS AND GOODWILL. THE HIGH COURT ACCEPTED THI S AND HELD THAT THE EXPENDITURE WAS ALLOWABLE UNDER SECTI ON 37 THE LT. ACT. IN JOINT COMMISSIONER OF INCOME TAX VS. DEVERSON INDUSTRIES LTD. (2007) 290ITR (A.T.) 287 (ITAT - AHM), THE ASSESSEE HAD PAID AN AMOUNT TO THE STATE GOVERN MENT TO HELP VILLAGERS AFFECTED BY EFFLUENT DISCHARGED FROM THE ASSESSEE'S FACTORIES AND SUCH AMOUNTS WERE PAID TO MUNICIPAL CORPORATION FOR TREATING EFFLUENTS. IT WA S ARGUED BY THE ASSESSEE THAT THE EXPENDITURE WAS LAID OUT T O PROTECT ITS BUSINESS AS AN ONGOING ENTITY AND TO AVOID POSS IBLE PROTRACTED LITIGATION. THE TRIBUNAL HELD THAT THE A SSESSEE HAD BUSINESS REASONS TO PARTICIPATE IN A SCHEME FRAMED BY THE HIGH COURT TO MAKE CONTRIBUTIONS FOR THIS SOCIAL CA USE. THEREFORE, THE ENTIRE EXPENDITURE INCURRED WAS DEDU CTIBLE. IN VIEW OF THESE RULINGS, THE APPELLANT WOULD SUBMIT T HAT THE AMOUNT PAID TO A.P. STATE HOUSING CORPORATION WAS N OT CAPITAL, BUT REVENUE EXPENDITURE. THE CIT(A) HAD OBSERVED THAT THE AMOUNT PAID TO A.P . STATE HOUSING CORPORATION WAS APPLICATION OF INCOME AND THE ORDER OF THE STATE GOVERNMENT WAS NOT A LEGAL CHARGE. THE APPELL ANT WOULD SUBMIT THAT SECTION 79(1) OF THE A.P. HOUSING BOARD ACT PROVIDES THAT THE GOVERNMENT MAY GIVE THE APPEL LANT SUCH DIRECTION AS AND WHEN NECESSARY OR EXPEDIENT F OR CARRYING ON THE PURPOSES OF THIS ACT. THEREFORE, SU CH DIRECTION HAD STATUTORY FORCE. THE APPELLANT WOULD NOT HAVE 71 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. BEEN ABLE TO CONTINUE ITS ACTIVITIES LAWFULLY WITHO UT OBEYING THE ORDER OF THE STATE GOVERNMENT TO PAY THE AMOUNT TO A.P. STATE HOUSING CORPORATION. IN THIS CONTEXT, THE APP ELLANT WOULD CITE THE FOLLOWING OBSERVATION OF THE GUJARAT HIGH COURT IN U.K. ACHARYA VS. STATE OF GUJARAT, AIR 1989 GUJARAT 81, IN WHICH SIMILAR PROVISION IN THE GUJARAT STATE HOUSING BOARD WAS EXAMINED: DISPOSAL OF PROPERTY REGULATIONS CANNOT BE SAID TO BE MERELY CONTRACTUAL IN CHARACTER NOR CAN THEY BE SAI D TO BE FRAMED FOR MERELY REGULATING INTERNAL AFFAIRS OF THE STATUTORY BODY, AS, WITH RESPECT, WRONGLY ASSUMED B Y THE LEARNED JUDGE. IT HAS ALSO TO BE KEPT IN VIEW T HAT MEMBERS OF THE PUBLIC FOR WHOM HOUSING SCHEMES ARE FLOATED BY THE BOARD HAVE NO CONTROL OV ER THE IMPLEMENTATION OF THE REGULATIONS BY THE BOARD. HENCE, THESE HOUSING REGULATIONS HAVE TO BE CONSIDE RED AS MANDATORY IN CHARACTER, HAVING BINDING STATUTORY FORCE. WE ARE, THEREFORE UNABLE TO AGREE WITH T.U. MEHTA, J'S CONCLUSION THAT DISPOSAL OF PROPERTY REGULATIONS FRAMED BY THE HOUSING BOARD IN EXERCISE OF ITS STATUTORY POWER UNDER S.74(B) ARE N OT STATUTORY IN CHARACTER. WE HOLD THAT THEY ARE, OF NECESSITY, TO BE TREATED AS STATUTORY IN CHARACTER FOR THE REASONS AFORESAID. HOWEVER, THAT DOES NOT ADVANCE T HE CASE OF THE LEARNED ADVOCATE FOR THE PETITIONERS AN INCH FURTHER. EVEN THOUGH' REGULATION 33 OF THE REGULATI ONS IS STATUTORY IN CHARACTER, THE DIRECTIONS ISSUED BY TH E STATE OF GUJARAT IN EXERCISE OF ITS STATUTORY POWERS UNDE R S.82 CANNOT BE SAID TO BE IN ANY WAY INCONSISTENT WITH T HIS REGULATION. THE SECOND REASON IS THAT UNDER S.82 OF THE ACT, TH E STATE OF GUJARAT IS ENTITLED TO GIVE DIRECTIONS TO THE HOUSING BOARD FOR THE PURPOSES OF THE ACT AND IF TH ESE DIRECTIONS ARE NOT FOUND TO BE ARBITRARY OR ILLEGAL , THEY ARE BINDING ON THE HOUSING BOARD AND THEY WOULD SUPERSEDE ANY OF THE EARLIER CONTRARY DECISIONS OF THE HOUSING BOARD AND IMPOSE A SPECIAL OBLIGATION ON TH E HOUSING BOARD TO COMPLY WITH SUCH DIRECTIONS. AS SE EN EARLIER, BY S.24 OF THE ACT, IT IS THE DUTY OF THE HOUSING BOARD TO INCUR EXPENDITURE AND UNDERTAKE WORKS OF S UCH HOUSING SCHEMES AS IT MAY CONSIDER NECESSARY FROM T IME TO TIME, SUBJECT TO THE CONTROL OF THE STATE GOVERN MENT. THUS, CONTROL OF THE STATE GOVERNMENT IS ALL PERVAS IVE IN CONNECTION WITH ANY OF THE HOUSING SCHEMES UNDERTAK EN BY THE BOARD. 72 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. THUS, THE PAYMENT TO A.P. STATE HOUSING CORPORATION WAS DONE IN THE MANNER PRESCRIBED IN THE A.P. HOUSING B OARD ACT, UNDER WHICH THE APPELLANT HAS BEEN CONSTITUTED. THE REFORE, SUCH PAYMENT IS PART AND PARCEL OF ITS REGULAR BUSI NESS. ACCORDINGLY, THE AMOUNT SHOULD BE TREATED AS REVENU E EXPENDITURE LAID OUT WHOLLY FOR THE PURPOSE OF ITS BUSINESS UNDER SECTION 37 OF L.T. ACT. THIS EXPENDITURE IS DEFINITELY A CHARGE ON INCOME A ND NOT AN APPLICATION OF INCOME AS HELD BY THE CIT(A). IN CAS E OF APPLICATION OF INCOME, THERE IS DISCRETION WITH THE PERSON MAKING THE PAYMENT AS TO PAY IT OR OTHERWISE, WHERE AS IN CASE OF OBLIGATORY OR COMPULSORY PAYMENT THE SAME H AS TO BE CHARGE ON INCOME. IN THE INSTANT CASE, THE PAYMENT BY THE APPELLANT TO A.P. STATE HOUSING CORPORATION AS PER THE ORDER OF GOVERNMENT WAS NOTHING BUT STATUTORY OBLIGATION IN NATURE FLOWING FROM SECTION 79(1) OF A.P.H.B. ACT. THIS EX PENDITURE IS ALSO IN THE NATURE OF DIVERSION OF INCOME BY OVE RRIDING TITLE. THE GOVERNMENT OF A.P. THROUGH ITS GOVT. ORD ER REQUIRED THE APPELLANT TO TREAT THE AMOUNT PAID TO A.P. STATE HOUSING CORPORATION AS ITS EXPENDITURE. THIS FURTHE R SHOWS THAT THE APPELLANT HAD NO DISCRETION IN RETAINING T HE AMOUNT AND THERE WAS LEGAL COMPULSION IN DIVERTING THE AMO UNT TO A.P. STATE HOUSING CORPORATION. THE INFRASTRUCTURE EXPENDITURE INCURRED BY THE APPELLANT IS CLEARLY AN ALLOWABLE EXPENDITURE ON TWO GROUNDS; ONE IS ON COMMERCIAL EXPEDIENCY AND SECOND BEING OF LEGAL IMPOST BY VIRT UE OF GOVT. ORDER. THE HON'BLE ITAT HAD REMANDED THE APPEALS FOR THE A .YS. 2004-05,2005- 06 AND 2006-07 TO THE CIT(A) FOR FRES H CONSIDERATION. HEARING HAD TAKEN PLACE FOR THESE YE ARS ON ADDITIONAL GROUNDS. THE A.O. HAS SUBMITTED REMAND R EPORT ON THESE SUBMISSIONS AND THE APPELLANT HAS SUBMITTED R EJOINDER ON THE REMAND REPORT. FURTHER, THE APPELLANT HAD SU BMITTED WRITTEN SUBMISSIONS ON THE ORIGINAL GROUNDS TAKEN I N THESE APPEALS AS THE ORDERS OF THE CIT(A) NO LONGER EXIST IN THE EYES OF THE LAW. THE A.O. HAS ALSO NOT SUBMITTED AN Y REMAND REPORT FOR THESE YEARS AS ALSO FOR THE A.Y. 2008-09 FOR WHICH THE CIT(A) HAS PASSED THE APPEAL ORDER. IN THIS SIT UATION, THE CIT(A) SHOULD NOT HAVE RELIED UPON VERBATIM REPRODU CTION OF THE PART OF THE EARLIER ORDER FOR THE A. Y. 2006-07 IN HIS ORDER FOR A.Y. 2008-09. THE APPELLANT FINDS THAT THE LANGUAGE OF PARAGRAPHS 6.1 4 TO 6.20 OF THE PRESENT ORDER HAS BEEN COPIED FROM THE PARAG RAPHS 6.13 TO 6.17 OF THE EARLIER APPELLATE ORDER FOR THE A.Y. 2006- 07, WHICH HAS BEEN REMANDED. OBSERVATIONS AND CONCL USIONS 73 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. IN THE EARLIER ORDER PASSED ON 30.10.2009 OF THE CI T(A) CANNOT BE EXPECTED TO TAKE INTO ACCOUNT THE SUBMISS IONS MADE AND RULINGS RELIED UPON BY THE APPELLANT IN TH E PRESENT PROCEEDING. IN THIS PROCESS, SOME ERRORS HAVE CREPT INTO THE APPEAL ORDER: I. AT PARAGRAPH 6.17 OF THE APPEAL ORDER FOR A.Y.20 08-09, THE CIT(A) HAS, MENTIONED THAT GOVERNMENT ORDERS QUOTED BY THE APPELLANT DOES NOT IN ANY WAY INDICATE THAT ANY MON EY IS TO BE PAID TO THE STATE GOVERNMENT IN LIEU OF LANDS PR OVIDED. BUT THE CIT(A) HAS MISSED OUT THE CONTENT OF THE LETTER DATED 23.12.2005 FROM THE GOVERNMENT OF ANDHRA PRADESH, EXTRACTED BY HIM AT PAGE 39 OF HIS ORDER. THE HEADI NG OF THIS LETTER STATES' UTILISATION OF AN AMOUNT TO THE EXTE NT OF VALUE OF GOVERNMENT LANDS TO BE PAID TO THE GOVERNMENT BY THE APHB FOR INFRASTRUCTURE DEVELOPMENT OF RAJIV GRUHAK ALPA'. AT PARAGRAPH 3 IN THIS LETTER, IT IS STATED THAT INFRA STRUCTURE COST UP TO THE EXTENT OF VALUE OF LAND TO BE PAID TO THE GOVERNMENT BY THE APHB WILL BE UTILISED FOR INFRASTRUCTURE DEV ELOPMENT UNDER RAJIV GRUHAKALPA SCHEME. IN THE EVENT OF SHOR TFALL, THE GOVERNMENT WILL ALLOT ADDITIONAL LAND TO APHB. FURT HER, IN THE MINUTES OF MEETING HELD IN CHAMBER OF HON 'BLE CHIE F MINISTER, EXTRACTED AT PAGE 41 OF THE ORDER OF THE CIT(A), IT IS NOTED THAT APHB WOULD REMIT RS.150 CRORE IN OCTOBER AND R S.400 CRORE IN NOV. AND ANOTHER RS.400 CRORE IN DECEMBER BY LEVERAGING LAND ALLOTTED TO IT. AT PAGE 55-56 OF TH E APPEAL ORDER, THE CIT(A) HAS EXTRACTED GORT NO.432 OF GOVE RNMENT OF ANDHRA PRADESH. AT PARAGRAPH 2 TO 4 IN THIS, IT IS MENTIONED THAT LAND HAS BEEN ALLOTTED TO APHB FOR W HICH IT HAS TO PAY THE LAND VALUE TO THE GOVERNMENT, WHICH WILL BEAR THE COST OF INFRASTRUCTURE. IN THE EVENT OF SHORTFA LL, THE GOVERNMENT WILL ALLOT ADDITIONAL LAND. THE SIGNIFIC ANCE OF THESE HAVE BEEN MISSED OUT BY THE CIT(A) FOR THE SI MPLE REASON THAT HIS DISCUSSION AND CONCLUSION HAVE BEEN COPIED FROM AN ORDER PASSED IN 2009. II. AT PARAGRAPH 6.20, THE CIT(A) HAS STATED THAT T HE APPELLANT HAD ARGUED THAT IT IS A LOCAL AUTHORITY. IN THE SUB MISSIONS MADE BY THE APPELLANT FOR THE A.Y. 2008-09, THERE W AS NO SUCH PLEADING. THIS OBSERVATION AND ELABORATE DISCU SSION ALONG WITH CITATIONS OF RULINGS ON WHAT CONSTITUTES A LOCAL AUTHORITY BY THE CIT(A) HAVE FOUND PLACE IN THE ORD ER ONLY BECAUSE SEVERAL PARAGRAPHS HAVE BEEN COPIED FROM TH E EARLIER ORDER DATED 30.10.2009 OF THE CIT(A) FOR THE A.Y. 2 006-07. III. THE APPELLANT HAS MADE SUBMISSIONS ON ALLOWABI LITY OF DEDUCTION UNDER SECTION 80-1B. WITHOUT CONSIDERING THE SAME, 74 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. THE CIT(A) HAS RELIED UPON THE FINDINGS OF HIS ORDE R DATED 31.10.2009 FOR THE A.Y. 2006-07 FOR UPHOLDING THE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80- IB. THE APPELLATE ORDER FOR THE A.Y. 2006-07 HAS ALREADY BEEN SET ASIDE BY THE IT A T FOR FRESH CONSIDERATIO N. THEREFORE, THE SUBMISSIONS MADE BY THE APPELLANT ON THIS ISSUE HAS NOT BEEN CONSIDERED BY THE CIT(A). THE CIT(A) AT PARAGRAPH 5.7.9 HAS EXTRACTED SECTION 13 OF APHB ACT, AND AT PARAGRAPH 5.7.10 HE HAS STATED THAT APH B IS FULLY COMPETENT TO ENTER INTO CONTRACTS IN ITS OWN CAPACI TY AND HAS REFERRED TO SECTION 14 TO STATE THAT THE VICE CHAIR MAN SHALL MAKE EVERY CONTRACT ON BEHALF OF APHB. HOWEVER, HE HAS N OT REFERRED TO SEVERAL OTHER PROVISIONS WHICH ARE IMPORTANT TO DEC IDE THE EXTENT OF AUTONOMY ENJOYED BY APHB. THE PROVISO TO SECTION 14 MANDATES THAT NO CONTRACT INVOLVING EXPENDITURE OF RUPEES MO RE THAN THE LIMITATION AS MAY BE FIXED BY THE GOVERNMENT SHALL BE MADE WITHOUT THE PREVIOUS SANCTION OF THE GOVERNMENT. TH IS AMOUNT WAS MENTIONED IN THIS PROVISO AS RS.3,0001- TILL THE AM ENDMENT OF THE ACT IN 2010. THE CIT(A) HAS GIVEN THE FINDING THAT APHB IS CONTROLLING ITS OWN AFFAIRS AND IS INDEPENDENT IN E NTERING INTO CONTRACTS AND TAKING LOANS. THEREFORE, IN PARAGRAPH 5.8.1 AND 5.8.2, HE HAS ARGUED THAT APHB IS NOT FUNCTIONING AS AN AG ENT OF THE STATE GOVERNMENT. HE HAS NOT REFERRED TO SECTION 21 OF TH E APHB ACT, WHICH CLEARLY STATES THAT SUBJECT TO THE CONTROL OF THE GOVERNMENT, BOARD MAY INCUR EXPENDITURE AND UNDERTAKE WORKS FOR FRAMING AND EXECUTION OF HOUSING SCHEMES. SECTION 60 ALLOWS APH B THE FREEDOM TO INCUR EXPENDITURE NOT EXCEEDING RS.10,0001- IN EXTREME URGENCY, WHICH IS NOT INCLUDED IN THE ANNUAL PROGRA MME SANCTIONED BY THE GOVERNMENT. SECTION 62(1) PERMITS APHB FROM TIME TO TIME, WITH THE PREVIOUS SANCTION OF THE GOVERNMENT AND SUBJECT TO THE PROVISIONS OF THE APHB ACT AND TO SUCH CONDITIONS A S MAY BE PRESCRIBED IN THIS BEHALF, BURROW ANY SUM REQUIRED FOR THE PURPOSE OF THE ACT. SECTION 79 EMPOWERS THE STATE GOVERNMEN T TO GIVE DIRECTION TO APHB AND OVERRULE ANY DECISION OR ORDE R OF IT. THESE PROVISIONS, SEVERELY RESTRICTING THE FREEDOM TO OPE RATE, SPEND, ENTER INTO CONTRACTS AND BORROW MONEY HAVE NOT BEEN REFERRED TO OR DISCUSSED IN THE ORDER OF THE CIT(A). 55. THE CIT(A) WHILE UPHOLDING THE DISALLOWANCE OF THE AFORESAID EXPENDITURE HAS OPINED THAT FOR CLAIMING A PARTICULAR EXPENDITURE IT IS TO BE EXAMINED WHETHER THERE IS A NY NEXUS BETWEEN THE MAIN ACTIVITY OF THE ASSESSEE AND THE E XPENDITURE IN 75 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. QUESTION. IT WAS FURTHER HELD BY THE CIT(A) REFERRI NG TO VARIOUS GOVT ORDERS, AS PER WHICH ACCORDING TO THE CLAIM OF THE ASSESSEE AN AMOUNT OF RS. 1180 CRORES WAS TRANSFERRED TO AP STA TE HOUSING CORPORATION, THAT THE MAIN OBJECTIVE OF THE APHB TO MAKE AND IMPLEMENT SCHEMES FOR PROVIDING OF HOUSING ACCOMMOD ATION IS BY SELLING THE HOUSES TO PROSPECTIVE BUYERS AT THE MAR KET RATE. FOR THIS PURPOSE, IT ACQUIRES LANDS, DEVELOPS AND SALES HOUSES BUILD ON THOSE LANDS. THE GOVT. ORDERS DIRECTING TRANSFER O F FUNDS TO AP STATE HOUSING CORPORATION IS ONLY AN ADMINISTRATIVE INSTRUCTION AND NO LEGAL CHARGE IS CREATED. THEREFORE, THE AMOUNT TRANSFERRED SINCE DOES NOT FALL WITHIN THE CATEGORY OF TAXES, CESS, O R LEGAL CHARGES THEY CANNOT BE CONSIDERED AS EXPENDITURE. IT WAS FU RTHER HELD BY THE CIT(A) THAT THERE IS NO NEXUS BETWEEN THE AMOUN T PAID BY THE ASSESSEE TO THE STATE GOVT AND THE ACTUAL ACTIVITY OF THE ASSESSEE. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO NOT PROVED THAT THE PAYMENT HAS BEEN FOR BUSINESS EXPEDIENCY. 56. ON CONSIDERING THE SUBMISSIONS OF THE PARTIES IN THE LIGHT OF THE MATERIALS ON RECORD AND ALSO THE RATIOS CITED B EFORE US, WE ARE CONSTRAINED TO HOLD THAT IT IS NOT AN ALLOWABLE EXP ENDITURE BUT ONLY AN APPLICATION OF INCOME. IT IS NOT IN DISPUTE THAT THE AMOUNT OF RS. 1180 CRORES IS STATED TO HAVE BEEN GIVEN TO THE AP STATE HOUSING CORPORATION ON THE DIRECTIVE OF THE GOVERNMENT. HOW EVER, THAT WOULD NOT AMOUNT TO AN EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. AN EXPENDITURE WHICH IS EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS IS A REVENUE EXPENDITURE AND, T HEREFORE, ALLOWABLE. ON APPRECIATION OF THE FACTS ON RECORD, IT IS QUITE EVIDENT THAT THE AMOUNT OF RS. 1180 CRORES WAS NOT SPENT BY THE ASSESSEE BOARD FOR THE PURPOSE OF ITS BUSINESS. THE SAID AMO UNT WAS TRANSFERRED TO AP STATE HOUSING CORPORATION AT THE DIRECTIVE OF THE GOVERNMENT FOR IMPLEMENTING CERTAIN HOUSING PROJECT S. THE ASSESSEE IS NO WAY CONNECTED WITH IMPLEMENTING THE PROJECT. THIS CANNOT BE SAID TO BE AN EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE DECISIONS RELIED U PON BY THE LEARNED AR ARE FACTUALLY DISTINGUISHABLE AS IN THOS E CASES THERE 76 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. WAS NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE BUSINESS OF THE ASSESSEE. THEREFORE, IN OUR VIEW THE REVENUE AU THORITIES WERE CORRECT IN DISALLOWING SUCH EXPENDITURE. 27. THOUGH THE LEARNED AR HAD SUBMITTED THAT THE RA TIO LAID DOWN IN CASE OF APHB(SUPRA) WOULD NOT BE APPLICABLE TO THE FACTS OF ASSESSEES CASE IN VIEW OF FACTUAL DIFFERENCE, BUT ON DEEPER EXAMINATI ON, WE ARE OF THE VIEW THAT PRINCIPLES DECIDED THEREIN WOULD ALSO APPLY TO THE FACTS OF THE PRESENT CASE. IN AFORESAID VIEW OF THE MATTER, ALL THE CONTENTI ONS OF THE ASSESSEE WITH REGARD TO NON TAXABILITY OF THE AMOUNT PAID TO WARDS PRIVILEGE FEE AND SPECIAL PRIVILEGE FEE ETC., FAILS. THE ASSESSEE HAS ALSO ASSAILED THE ORDER PASSED BY THE CIT (A) BY CONTENDING THAT SINCE THE TRIBU NAL HAD DIRECTED THE CIT (A) ONLY TO CONSIDER THE AMENDMENT SHE WAS NOT COMPE TENT TO THE VALIDITY OF AMENDMENT. HOWEVER, SUCH CONTENTION OF THE LEARNED AR IS NOT ACCEPTABLE. EVEN IF WE ACCEPT THAT THE CIT (A) IS NOT COMPETENT TO GO INTO THE VALIDITY OF THE AMENDMENT BUT IT HAS NO DIRECT BE ARING ON THE ULTIMATE CONCLUSION REACHED BY HER. THE ASSESSEE HAS RAISED A FURTHER GROUND THAT THE CIT HAS DROPPED THE PROCEEDING U/S 263 OF THE A CT FOR THE ASSESSMENT YEAR 2001-02 THEREFORE A DIFFERENT VIEW COULD NOT HA VE BEEN TAKEN BY THE DEPARTMENT FOR THE IMPUGNED ASSESSMENT YEAR. THIS CONT ENTION OF THE ASSESSEE IS NOT ACCEPTABLE AS PRINCIPLES OF RES JUDICATA DO NOT STRICTLY APPLY TO THE INCOME-TAX PROCEEDINGS. EVEN OTHERWISE ALSO AS CAN BE SEEN FROM FACTS ON RECORD, THE CIT HAS REVISED THE ASSESSMENT ORDER BY INVOKING HIS POWERS U/S 263 OF THE ACT FOR THE ASSESSMENT YEAR 2006-07. THEREFORE, THE ASSESSEES CONTENTION THAT PROCEEDINGS INITIATED U/S 263 FO R THE ASSESSMENT YEAR 2001-02 HAVING BEEN DROPPED, DIFFERENT VIEW CAN BE TAKEN IS NOT ACCEPTABLE. IT WAS ALSO CONTENDED BY THE LEARNED AR TH AT THE TRIBUNAL HAD REMITTED THE MATTER BACK TO THE CIT (A) FOR A LIMIT ED PURPOSE OF EXAMINING THE AMENDMENTS MADE TO EXCISE ACT BY INSERTING NEW PRO VISIONS 4A, 4B AND 4C. THEREFORE THE CIT (A) IS NOT COMPETENT TO GO INTO THE OTHER ASPECTS OF 77 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. APPLICATION OF INCOME AND DISALLOWANCE OF EXPENDITURE AS THE TRIBUNAL HAS REJECTED SUCH FINDINGS OF CIT (A). ON A PERUSAL OF THE O RDER PASSED BY THE TRIBUNAL WHILE REMANDING THE MATTER BACK TO THE CIT (A), IT IS TO BE NOTED THAT THE TRIBUNAL HAS DIRECTED THE CIT (A) TO DECIDE T HE MATTER DE NOVO AFTER TAKING INTO CONSIDERATION THE AMENDMENTS MADE TO TH E EXCISE ACT. NOWHERE THE TRIBUNAL HAS MADE ANY OBSERVATION WITH RE GARD TO THE MERITS OF THE ADDITION. THEREFORE THE CONTENTION OF THE LEARN ED AR IS NOT ACCEPTABLE. IN VIEW OF OUR FINDING HEREINABOVE, GROUND NOS.1-15 ARE DISMISSED. 28. IN GROUND NO.16, THE ASSESSEE HAS CHALLENGED THE DISA LLOWANCE OF PROVISION FOR LEAVE ENCASHMENT OF RS.30,90,849/- BY CONT ENDING THAT THE CIT (A) HAS NOT DECIDED THE AFORESAID GROUND. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS TO BE NOTED THAT THE ASSESSING OFFICER HAS DI SALLOWED THE AFORESAID AMOUNT BY OBSERVING THAT THE AUTHORISED REPR ESENTATIVE WAS NOT ABLE TO EXPLAIN THE SAME. AS CAN BE SEEN FROM THE ORD ER OF THE CIT (A), SHE HAS NOT DECIDED THE ISSUE. WE THEREFORE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER IT AFRESH AFTER AFFORDIN G DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 29. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS PART LY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 303 AND 545/HYD/2013 : FACTS BEING SIMILAR AND ISSUES RAISED IN THE G ROUNDS BEING IDENTICAL TO GROUND NOS. 1 TO 15 RAISED IN APPEAL NO.302/HYD/2013 PERTAINING TO THE ASSESSMENT YEAR 2 006-07, WE FOLLOW THE REASONING GIVEN THEREIN IN THIS ORDER WHILE DECIDING THE AFORESAID GROUNDS AND DISMISS ALL THE GROUNDS IN THESE TWO APPEALS ALSO. 78 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD. 30. IN THE RESULT, ITA NO.302/HYD/2013 IS TREATED A S PARTLY ALLOWED FOR STATISTICAL PURPOSES WHILE ITA NOS. 303 AND 545/HYD/2013 ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 21 -01-2014. SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 21ST JANUARY, 2014. JMR* COPY TO:- 1) C/O S/SRI K. VASANT KUMAR AND A.V. RAGHU RAM, ADVOCATES, 610, 6TH FLOOR, BASHEERBAGH, HYDERABAD. 2) THE ITO, WARD-(1), AAYAKAR BHAVAN, HYDERABAD. 3) CIT (A)-II, HYDERABAD. 4) CIT-I, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 79 ITA NOS.302-303 &545 OF 2012 AP BEVERAGES CORPORA TION, HYD.