M/S.KERALA STATE BEVERAGES (M&M) CORPORATION LTD V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1 (1)

WP(C)/5405/2014

AI Insights

The case involves M/S. Kerala State Beverages (M&M) Corporation Ltd, which is contesting the assessment orders issued by the Income Tax Department for the assessment years 2009-2010, 2010-2011, and 2011-2012. The primary legal issue is whether the 'Surcharge' and 'Turn over Tax' paid by the petitioner under the Kerala Surcharge on Taxes Act, 1957, and the Kerala General Sales Tax Act, 1963, respectively, are deductible from the total income under Section 37 of the Income Tax Act for the purpose of income tax computation. The petitioner argued that these payments are exclusively for business purposes and should be deductible, while the respondents contended that these payments should be included in the total income for tax assessment. The court directed the petitioner to pay 40% of the disputed amount to continue receiving an interim stay on coercive recovery actions while the appeals are being considered.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 761363 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 25-02-2014
• Assessment Year: misc
• Other Referred Cases: A.V. Thomas & Co. Ltd. V. Commissioner of Income Tax (159 ITR 431)
• Laws Referred To: Kerala Surcharge on Taxes Act, 1957, Kerala General Sales Tax Act, 1963, Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: P K MENON; JOSE JOSEPH
• Assessee Lawyers: ANIL NAIR; R SREEJITH; SULEKHA C S; ROSIE JOSEPH
• Keywords: Appeal; Assessment; Income Tax; Stay Petition; Surcharge; Turn over tax
• Section: 37; 40(ii)(b)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 25TH DAY OF FEBRUARY 2014/6TH PHALGUNA, 1935 WP(C).No. 5405 of 2014 (A) --------------------------- PETITIONER(S): -------------------------- M/S. KERALA STATE BEVERAGES (M&M) CORPORATION LTD, SASTHAKRIPA OFFICE COMPLEX, P.B NO. 2263, SASTHAMANGALAM, REPRESENTED BY COMPANY SECRETARY, TRIVANDRUM. BY ADVS.SRI.ANIL D. NAIR, SRI.R.SREEJITH, SRI. SULEKHA BEEVI C.S., SRI. ROSIE ATHULYA JOSEPH. RESPONDENT(S): ---------------------------- 1. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1 (1), TRIVANDRUM -695 001. 2. THE COMMISSIONER OF INCOME TAX (APPEALS), COCHIN- 695 001. BY SRI.P.K. RAVINDRANATHA MENON, SENIOR SC. ADV. SRI.JOSE JOSEPH, SC. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 25-02-2014, ALONG WITH WP(C).NO.5406 OF 2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs. WP(C).No. 5405 of 2014 (A) APPENDIX PETITIONER'S EXHIBITS:- EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 16-12-2013 FOR THE YEAR 2011-12 ISSUED TO THE PETITIONER BY THE FIRST RESPONDENT EXHIBIT P2 TRUE COPY OF THE APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P3 TRUE COPY OF THE STA Y PETITION FILED BEFORE THE SECOND RESPONDENT EXHIBIT P4 TRUE COPY OF THE NOTICE DATED 14-02-2014 ISSUED TO THE PETITIONER. RESPONDENT'S EXHIBITS:- NIL. //TRUE COPY// P.A. TO JUDGE rs. P.R. RAMACHANDRA MENON, J. ======================== W.P.(C). Nos. 5405 & 5406 of 2014 -------------------------------------------- Dated this the 25 th day of February, 2014 JUDGMENT The issue involved in both these cases is almost common, in so far as the question of law is concerned. The petitioner is doing the business of wholesale and retail trading of Indian Made Foreign Liquor ('IMFL')and Beer within the State of Kerala. The dispute involved in W.P.(C). No. 5405/2014 is in respect of the assessment year 2011-2012, whereas the challenge in the other case is with regard to the assessment years 2009-2010 and 2010-2011. 2. The basic issue involved is whether the 'Surcharge' paid by the petitioner under the relevant provisions of the Kerala Surcharge on Taxes Act, 1957 and the 'Turn over Tax' satisfied in terms of the provisions of the Kerala General Sales Tax Act, 1963 are liable to be deducted from the total income, as envisaged under Section 37 of the Income Tax Act, for the purpose of computation of Income Tax. The assessee filed returns declaring the income as stated therein, in respect of the concerned W.P.C. Nos. 5405 & 5406/14 -2- assessment years. Scrutiny assessment was proposed to be made and notice was issued to the assessee, when detailed objection was submitted. After considering the same, Ext.P1 assessment order was passed declining the claim, holding that the deduction was impermissible under the statute and it was accordingly, that a total liability of 221,43,29,270/- was ₹ mulcted upon the shoulders of the petitioner; followed by demand notice. This in turn was challenged by filing Ext.P2 appeal along with Ext.P3 petition for stay, which are pending consideration before the second respondent. The grievance is with regard to the coercive proceedings being pursued in the meanwhile, as borne by Ext.P4 and hence the writ petition. 3. Coming to the case of W.P.(C). No. 5406/2014, similar assessment orders were passed earlier, as borne by Ext.P1 and P2, which were sought to be challenged by filing appeal before the first appellate authority, leading to Exts. P3 and P4 orders. The said orders being detrimental to the rights and interests, the petitioner has approached the second respondent/Tribunal by filing Exts. P5 and P6 appeals, along with Exts. P7 and P8 W.P.C. Nos. 5405 & 5406/14 -3- petitions for stay. Despite this, coercive proceedings are being taken as borne by Ext.P9, which hence is under challenge. 4. Heard Sri. Anil D Nair, learned counsel for the petitioner and Sri. P.K. Ravindranatha Menon, learned Senior Counsel appearing for the respondents at length. 5. The learned counsel for the petitioner submits that the proceedings finalized by the concerned authorities are per se wrong and illegal in all respects and that, the 'Surcharge' paid by the petitioner under the relevant provisions of Kerala Surcharge on Taxes Act, 1957 and the 'Turn over Tax' satisfied in terms of the provisions of the Kerala General Sales Tax Act, 1963 are by virtue of the statutory provisions and hence the said liability cannot be passed on to the purchasers, more so since there are penal provisions as well, if any course to the contrary is pursed by the petitioner. This being the position, the said payments effected by the petitioner are liable to be treated as 'exclusively for the purpose of business' and hence eligible for reduction under Section 37 of the Income Tax Act, submits the learned counsel. W.P.C. Nos. 5405 & 5406/14 -4- 6. The said version is sought to be rebutted by the learned Senior Counsel appearing for the Department/Revenue pointing out that the said payments, though are not liable to be passed on to the customers, should be reflected in total income which is to be offered for assessment and that the deduction sought to be made by the petitioners is not sustainable, in view of the law already declared by a Full Bench of this Court as per the decision in A.V. Thomas & Co. Ltd. V. Commissioner of Income Tax (159 ITR 431). It is also brought to the notice of this Court that the principle to be followed in such circumstance based on the binding judicial precedents has been sought to be clarified by virtue of incorporation of a provision as per Section 40 (ii) (b) to be in effect from 1.04.2014. 7. This however is a matter to be considered and decided by the competent authority, before whom the statutory appeals are pending. This being the position, this Court finds it not fit and proper to express anything on merits. Considering the facts and circumstances, both the writ petitions are disposed of, directing the petitioner to satisfy 40% of the outstanding liability W.P.C. Nos. 5405 & 5406/14 -5- in both the cases, so as to have the benefit of interim stay during the pendency of the finalization of the appeals. The said amount shall be satisfied by the petitioner on or before 20.03.2014, upon which the interim stay will continue till finalization of the appeals by the appellate authority/forum. The second respondent in both the cases are directed to consider and finalize the appeals preferred by the petitioner, passing speaking orders, after hearing the petitioner, as expeditiously as possible. Both the writ petitions are disposed of. P.R. RAMACHANDRA MENON, JUDGE. kp/- "