TaxTMI 
TaxTMI 
2013 (11) TMI 922
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....it is to the assessee being sole the whole procurer/distributor as revenue expenditure. Charging of interest u/ss.234D, 234B and 234C have also been challenged which will be adjudicated as and when the issue is taken up year-wise. 2. The Revenue is in appeal for the Assessment Year 2004-05 when the sole issue for consideration is whether the learned CIT(A) was justified in deleting the addition of Rs.5 Crores made under the head "License Fees" 3. We propose to the dispose of all the appeals together for the sake of convenience and brevity, as per the proceedings at the time of hearing. 4. The learned Counsel for the assessee initiating his arguments submitted the brief facts on the issues involved in common and submitted as follows : (i) That the Appellant is a Corporation, fully owned by the Government of Orissa within the meaning of section 619 of the Indian Companies Act, 1956, incorporated on 06.11.2000. It has statutory monopoly distribution of Indian made Foreign Liquor (in short IMFL) and Country Liquor consequent upon and to carry out the purpose of section 20-A of the Bihar Orissa Excise Act, 1915 as introduced by Bihar and Orissa Excise (Orissa Amendment ....
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....e entitled to any privilege or license for importing, exporting and supplying the same in wholesale, or distributing the same in any part of the State. By order of the Governor Sd/- Commissioner-cum-Secretary to Government. (Published in Orissa Gazette Ext. No.132, dt. 31.1.2001 as SRO 50/2001) GOVERNMENT OF ORISSA EXCISE DEPARTMENT NOTIFICATION No.OSBC-19/2000-2891/Ex., Bhubaneswar Dated: April 28, 2001 In exercise of the powers conferred by Section 20-A of the Bihar and Orissa Excise Act, 1915 (Bihar and Orissa Excise Act 2 of 1915), the State Government do hereby appoint the first day of May, 2001 as the date on and from which the right to carry on wholesale trade and distribution of Country Spirit (C.S.) in the State shall solely vest in the State Government and specify that the Orissa State Beverage Corporation Limited shall have the exclusive right and privilege, of carrying on the wholesale trade and distribution of Country Spirit (C.S.) in the State on behalf of the State Government for the whole of the State of Orissa, and no other person shall be entitled to any privilege or licence for supplying th....
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.... the exclusive right and privilege of importing, exporting and carrying on the wholesale trade and distribution of IMFL and country liquor in the state on behalf of the State Government for the whole of the State of Orissa and no person shall be entitled to any privilege or license for importing, exporting and supplying the same in wholesale or distributing the same for the whole or any part of the state. Therefore, it is submitted that this section excludes statutorily any other person who was once entitled to any privilege or license for importing, exporting and carrying on the wholesale trade and distribution of foreign and country liquor is vested on the state and subject to rules inter-alia, that a corporation established shall have exercising exclusive right of privilege of doing the said business on behalf of the state Government. The Bihar and Orissa Excise Act, 1915 otherwise under section 89 authorizes the state government to make a set of rules and the Board makes rule which are enumerated in sub-section 1 to 14 of section 90 of the Act. The aforesaid rules have different field of operation and in view of section 20-A the corporation once created to do business, but the ....
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....sh discount receivable from those supplier as per the calculation made by the help of the soft ware. The said method of calculation was duly ratified by the Board of Directors in its 13th. Meeting held on 20.08.03. The computation of cash discount as per agreement by the help of the soft ware was taken up in the early part of the financial year 2004-05, and the same was also computed in the same financial year. The year wise computation is given below: Year Cash discount by the help of soft ware. ( in Rs.) Cash discount deducted as per old method. (in Rs.) 2000-01 15,98,160.10 1,46,420.00 2001-02 1,09,23,763.42 30,97,750.67 2002-03 51,74,824.54 26,20,995.25 2003-04 80,05,942.89 44,02,154.29 TOTAL 2,57,02,690.95 1,02,67,320.21 In view of the above fact it may be considered to allow the accrual of incremental income due to change of method of cash discount which has been followed through procedure approved by the competent authority. While calculating the advance tax for the assessment year 2005-06 the Appellant Corporation has already computed the same and paid the tax for all the years the copy of the audited accounts for the relevant assessm....
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....e completed assessment. The General principle is that once an assessment is completed it becomes final. The Sec. 147 of the Act empowers the assessing officer to re-open an assessment if, the conditions prescribed below are satisfied. I. The Assessing Officer has to record the reason for taking action u/s.147. It is on the basis on such the reason recorded on the file that the validity of the order re-opening of the assessment has to be decided and the recorded reasons must have a link with the formation of belief. II. The assessing officer has reason to belief that any income chargeable to tax has escaped assessment for any assessment year. III. The action has to be taken within the specific period as prescribed u/s.153 of the Act. It have been settled in many cases that assessing officer to complete assessment without providing the reasons recorded in spite of request were held invalid. Communication of recorded reasons is also mandatory. It has also been held that though the reopening no re-assessment can be made to make an enquiry and verification of a....
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....No.-552/CTK/2005. On 17.04.2006 this Hon'ble bench has been pleased to pass the order by setting aside the First Appellate order and directed the Ld. C.I.T. (A) to decide the issues relating to privileges fees afresh after considering the decision of Apex Court in the case of "State of Punjab -vs.- Devans Modern Breweries Ltd. (2004) 11 SCC 26". The Hon'ble Bench had also directed the Ld. C.I.T. (A) to consider the difference of cash discount receivable by by-furcating it in various years and making the additions only the amount relatable to the relevant Assessment Year. (iii) That the Appeal has been taken up by the Ld. C.I.T. on three occasions and at the time of hearing of the Appeal it has been specifically pleaded as follows: B: PRIVILEGE FEES:- Whether the power of State Government to impose import fees is within the competence of the State and whether import fees is the price for parting with the privilege given to the licensees to import liquor. It has been held by majority view that "The State, in this case, has granted such permit to the Beverages Corporation on their paying the fee fixed for the purpose as per notification enabli....
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....the Government, the appellant has earned huge profit and paid the tax there on. The appellant is submitting herewith the position of its return for the years under appeal as follows: SL. NO. ASSESSMENT YEAR RETURNED INCOME 01. 2001-02 10,34,060.00 02. 2002-03 1,69,71770.00 03. 2003-04 58,50,920.00 04. 2004-05 1,03,18,990.00 05. 2006-07 1,92,41,318.00 06. 2007-08 14,64,01,490.00 07. 2008-09 13,54,29,060.00 From the aforesaid table it can be appreciated that the appellant's income is substantially increasing year after year and presently the appellant is one of the ten large Income Tax payer of the state. Since issue relating to privilege fees is common for all the assessment years except the assessment year 2007-08 and 2008-09, wherein the Appellant did not pay any privilege fees as per the Excise Policies for the relevant year, but the Ld. AO has added the same under presumption that the privilege fees of Rs. 5 Crores is inclusive of license fees therefore disallowed. In appeal the addition has unfortunately been confirmed by the Ld. CIT (A) despite the Appellant's contentions and submissions before him that, the Ld. A.O b....
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....x. It is not out place to mention here that the corporation being a Govt. of Orissa undertaking has paid the legitimate tax due and the exact amount of cash discount has not been accounted for in the year in which it was due as at that point of time the corporation did not have the proper method of calculation by the help of the new soft ware employed. The differential income is generated due to the developments as stated above and the same may be treated as to have been accrued during the period of change of such concept i.e. financial year 2001-02. That the Ld. C.I.T (A) did not consider the aforesaid submissions made by the Appellant in its proper prospective and misinterpreted the decision of the Hon'ble Apex Court which is very much related to the Appellant's case. The Ld. C.I.T. (A) without applying his mind confirmed the First Appellate Order passed by his predecessor on 15.09.2005 in totality. Further an appeal relating to the assessment year 2005-06 is pending for adjudication before the ld. CIT (A) bearing ITA NO 0256/2008-09, wherein the Ld. AO has passed the assessment order by violating the provisions of the Act and natural justice. The appe....
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....earing without deciding the reopening issue, the Ld. CIT (A) had issued a notice for enhancement of income towards "Security Deposits" which was collected by the petitioner from manufacturer/supplier of liquor to the Corporation amounting to Rs.69,00,000/- whereas the opening balance of the same was at Rs.58,00,000/- carried forward from the earlier years, therefore the Ld. CIT (A) has enhanced the assessment at Rs.11,00,000/- treating the Security Deposit as trading receipt. The petitioner has already disclosed the same at the liability side of the Balance Sheet and as per the petitioner's own submission that the Security Deposit is only meant for due performance of contract and it is not a trading receipt. The Security Deposit is also refundable to the supplier after due performance of contract or when the supplier gets away from the contract. That at the time of Appeal Proceeding the petitioner has filed an objection to the proposed enhancement before the CIT (A) for consideration. But he disagreed with the submission made by the Appellant and by referring various case laws and treated the Security Deposit as a revenue receipt thus a business income and enhanced the assessment t....
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....- has already included in the income of the previous year, therefore the same has been deducted from profit of this year. So far as the prior period expenses amounting to Rs 8, 02660.67 is concerned, it appears that those expenses are related to the earlier year, though it has been claimed but for due approval it was not finalized during that period but finalized during this financial year, and after approval by the competent authority and liability has been crystallized. All those expenditures are allowable revenue expenditure for the previous years but could not be claimed during that year due to finalization. The expenses are mostly relating to Income Tax Payment, Depot expenses, Pension, salary & leave contribution, security service charges and other deduction. But it has been disallowed by the A.O without verification which is capable of being verified. G: SERVICE TAX PAYABLE: That the Ld. AO has disallowed service tax payable amounting to Rs.54, 69,462 /- applying section 43B of the Act. The Appellant submits that it has been held where the assessee maintaining mercantile system of accounting collected service tax but did not deposit a portion ther....
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....llowed depreciation of Commander Jeeps used by the Excise Department for investigation work to check illicit trade whether could be considered in the hands of the assessee insofar as the assessee claims that the payments for the jeeps was claimed as capital expenditure over and above other payments to them. The depreciation definitely has to be disallowed insofar as the put to use is not by the assessee but the recipients of the Jeeps namely Excise Department. Interest u/ss.234A, 234B and 234C are mandatory provisions which are to be levied in accordance with the provisions of the I.T.Act. The learned CIT(A) allowed the license fees which includes the privilege fees therefore committed an error which may kindly be rectified. 5.3. For the Assessment Year 2006-07, the learned CIT(A) sustained the addition of Rs.5 Crores towards privilege fees. Similarly security deposit was considered as income and however partly reduced the disallowance of prior period expenses which may kindly be considered in the light of the assessee not able to furnish the details with respect to crystallizing of the expenses in the impugned Assessment Year which is again the subject matter of appeal by the ass....
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....ar 2005-06 therefore could not have been claimed in the Assessment Year 2001-02 validates the reopening of the assessment, which ground is dismissed as such. Insofar as on merit, an issue which is common in respect to other years with respect to the privilege fees claimed as expenditure made by the assessee being payment to Excise Department. Before us the learned Counsel for the assessee submitted that the said excise policy allows the assessee to contribute to the Excise Department exchequer being the sole distributor for procuring IMFL when the license are to be issued by the Excise Department. The license are issued by the Excise Department on the basis of distilleries, breweries and bottling units compounding and blending insofar as the Excise Department is the authority to conduct proper enquiries before issuing license when the sales are made by the assessee after procurement of the IMFL. The Excise Department on the basis of granting license to the buyers of the products sold by the assessee is entitled to license which privilege fees is demanded by the Excise Department. Therefore at no point of time can the assessee claim that it was not the part of expenditure for the pu....
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.... license fees including the payment of privilege fees which remain intact at the threshold. In this view of the matter, we do not find any merit in the contention of the learned CIT-DR to uphold the finding of the learned CIT(A) as the learned CIT(A) merely followed the earlier decision when the Assessment Year 2003-04 on the actual fact finding he only considered it to be allowed and the license fees which was already claimed as revenue expenditure stood allowed by the Assessing Officer earlier and later as well. The privilege fee therefore is directed to be allowed for all the respective AYs as submitted by the learned Counsel for the assessee. 6.1. There is no controversy with respect to the security deposits being held by the assessee as liability which could not be taxed in the hands of the assessee insofar as the accounting procedure indicates the monopolistic trade of IMFL which in one go cannot be pushed aside for a fresh beginning in a subsequent year unless a specific finding for taxing it as income unilaterally. This remains the domain of the assessee being the wholesale procurer and distributor for the State of Orissa. In other words, responsibility and commitment lies....