The Commissioner of Income TAx, V. M/s. Keerthi Wines

ITTA/139/2012

AI Insights

The case involves M/s. Keerthi Wines, a firm dealing in liquor, which filed its income tax return for the Assessment Year 2002-03, claiming deductions for interest and remuneration paid to partners. The initial assessment was processed under Section 143(1) of the Income Tax Act, 1961, but was later reassessed under Section 148 due to issues with the liquor license, which was originally issued to an individual and not a partnership. The ITAT and the Commissioner of Income Tax (Appeals) had previously ruled in favor of the assessee, treating it as a partnership firm. However, the Revenue's appeal to the High Court, referencing a decision in Commissioner of Income Tax, Vijayawada v. M/s. Swarna Bar & Restaurant, led to a reversal of this ruling, emphasizing the legal requirement for a partnership to obtain specific permission to operate a liquor business.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 719147 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 10-10-2012
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Vijayawada v. M/s. Swarna Bar & Restaurant (334 ITR 337)
• Laws Referred To: Income Tax Act, 1961, A.P Excise Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment Year 2002-03; Income Tax; Liquor license; Partnership firm; Penalty proceedings
• Section: 148; 143(1); 271(1)(c); 15

Judgement Text

"THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA I.T.T.A. No.139 of 2012 Judgment (Per the Hon’ble Sri Justice Goda Raghuram): Heard Sri J.V.Prasad, learned Standing Counsel for Income Tax for the appellant. There is no representation on behalf of the respondent-M/s.Keerthi Wines, Khammam. By the order dated 08.08.2012, this Court permitted the learned counsel for the appellant to serve notice of the appeal on the respondent by publication in the Khammam District Edition of Andhra Jyothi Telugu Daily Newspaper, since notice could not be served on the respondent by the normal process. Proof of publication of notice in the Khammam Edition of Andhra Jyothi Telugu Daily Newspaper, dated 18.08.2012 has been filed on behalf of the appellant. In the circumstances, this appeal is taken up for disposal. The brief facts are that the respondent-assessee filed its return of income for the Assessment Year 2002-03 in the status of a firm admitting a total income of Rs.15,340/- by deducting interest and remuneration paid to the partners. The return was initially processed under Section 143(1) of the Income Tax Act, 1961 (for short ‘the Act’). Subsequently it was noticed that the licence to deal in liquor was originally issued in the name of an individual and the individual thereafter entered into a partnership agreement with other partners. The return was filed claiming deduction of interest and remuneration paid to partners. In the circumstances, notice under Section 148 of the Act was issued and eventually an order of Assessment was passed on 06.03.2012 determining the balance tax liability at Rs.67,670/- while intimating that penalty proceedings under Section 271(1)(c) of the Act would be issued separately. The assessee preferred an appeal which was allowed by the Commissioner of Income Tax (Appeals), Vijayawada on the basis of an order of the ITAT, Visakhapatnam Bench dated 10.07.2006 in I.T.A.No.139/Vizag/2006 holding that in the facts and circumstances the status of the assessee must be determined as a partnership firm and not as an association of partners. Aggrieved, the Revenue unsuccessfully preferred appeal to the ITAT, Hyderabad Bench, which was rejected by the order impugned dated 06.02.2007. In the impugned order, the Tribunal relied on the decision of the Visakhapatnam Bench dated 10.07.2006 in I.T.A.No.139/Vizag/2006, the same decision as relied by the Commissioner of Income Tax (Appeals). It is brought to our notice by the learned Standing Counsel for Income Tax that this Court in Commissioner of Income Tax, Vijayawada v. M/s. Swarna Bar & Restaurant (334 ITR 337) has ruled that since Section 15 of the A.P Excise Act prohibits any person from selling or purchasing intoxicating liquor except in accordance with the terms and conditions of a licence granted in his favour; in a case where a licence is granted in favour of an individual, only he could carry on the business in the purchase and sale of intoxicating liquor and no partnership firm can carry on such business save with the prior permission of the Commissioner of Prohibition and Excise; and that in the circumstances the orders of the Tribunal to the contrary are set aside. In the light of the decision of this Court in Swarna Bar & Restaurant, this appeal by the Revenue requires to be allowed and is accordingly allowed. No costs. JUSTICE GODA RAGHURAM Date: 10.10.2012 JUSTICE B.N. RAO NALLA va THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA I.T.T.A. No.139 of 2012 (order of the Bench delivered by the Hon’ble Sri Justice Goda Raghuram) Date: 10.10.2012 va "