TaxTMI 
TaxTMI 
2020 (11) TMI 771
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....ee that since license fees is exclusively not levied on the assessee, provisions of clause (iib) of Section 40(a) are not applicable. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in ignoring the contention of the assessee that the license fees paid by the assessee to carry on the liquor trading under section 22 of the Bihar & Orissa Excise Act, 1915, is an allowable expenditure. 5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of AO by misinterpreting the provisions of clause (iib) of Section 40(a) of the Act. 6. The appellant craves leave to add, amend or alter any of the grounds of appeal." 3. Ground Nos.1 & 6 are general in nature. 4. Apropos Ground Nos.2 to 5 of appeal, facts of the case are that the assessee company is a State Government undertaking under the Ministry of Excise, Government of Odisha. During the year under consideration, the assessee company is engaged in the business of supply of wholesale foreign liquor, Indian made Foreign liquor and country liquor manufactured from molases for the whole of ....
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....favour of the revenue by the decision of ITAT in assessee's own case in ITA No.130/CTK/2018 for A.Y. 2014-15, but in that order some of the arguments by the assessee were not dealt in while passing the order, therefore, same should not be considered as the basis for determination of the case now under consideration. 9. Ld A.R. submitted that the provisions of section 40(a)(iib) are attracted only when any amount paid by way of license fee, etc is levied exclusively on the State Government Undertaking by a State Government. He submitted that there lies a distinction between license fees being levied exclusively on a State Government Undertaking as envisaged under section 40(a)(iib) of the Act and license fees being paid by State Government Undertaking/any other person to State Government to obtain a license/privilege of carrying on a particular line of business. Ld A.R. also in its written submissions, submitted as under: 1. In view of Article 246(3) read with Item no. 8, 66 and 51 of List II of Schedule VII of Constitution of India, the State Government has the exclusive right to grant privilege for manufacture, possession, sale of intoxicating liquor. It has the exclus....
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....rying for each of the licenses prescribed. License fee is not an exclusive levy from the assessee but is a levy recovered from all dealers dealing with liquor and covered under the Act and the Rules made there under. The assessee, like any other person engaged in business relating to liquor, is also required to pay the prescribed license fees for renewal of its license and to be able to carry on its business. In fact, it is mandatory for the assessee to pay such license fees in order to carry on the business. The payment of such license fees is must for the assessee /any person engaged in such business to carry on its business i.e. without making such payment, the business will not exist. Further, even if any other person would have carried on such business, he would have required to pay such fees. This aspect has not been considered by the Hon'ble ITAT. 6. Thus, when license fee is allowed as a charge (deduction) against profits in all other cases of sellers dealing in foreign liquor, the same cannot be considered as an exclusive levy in the case of State Government Undertakings. Character of levy, which is applicable to all sellers as a deduction against profits, doe....
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....ernment. As a result it has been claimed that such income by way of surplus is not subject to tax. It is a settled law that State Government undertakings are separate legal entities than the State and are liable to income-tax. In order to protect the tax base of State Government undertakings vis-a-vis exclusive levy of fee, charge, etc. or appropriation of amount by the State Governments from its undertakings, it is proposed to amend section 40 of the Income-tax Act to provide that any amount paid by way of fee, charge, etc., which is levied exclusively on, or any amount appropriated, directly or indirectly, from a State Government undertaking, by the State Government, shall not be allowed as deduction for the purposes of computation of income of such undertakings under the head "Profits and gains of business or profession". It is also proposed to define the expression "State Government Undertaking" for this purpose. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years." 9. Thus, the intention is to curb tax avoidance practice. The intention is not to d....
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.... Undertaking as provided under section 40(a)(iib) and privilege fees charged by the State Government to assign right to carry on a business which falls under the exclusive domain of the State. 14. As a matter of fact, at the cost of repetition, it is submitted that the Excise Notification prescribes the license fees for any and every kind of business in relation to liquor and is mandatorily to be paid and similar fee is also recovered from Bar Hotels, license from Sea Men's and Marine Officers' Club, License from Clubs, License for sale of medicated Wines/Medicines, License for Bar, Wine Parlour, License for Beer shop, License for Beer Parlour, License for Warehousing and License for Retail Shop. Thus, there is no exclusivity whatsoever. 15. In view of the above, it is submitted that though the facts for assessee's case in preceding year are same as that of the year under consideration, however, the decision rendered by the Hon'ble ITAT has not taken into the above said contentions of assessee. Keeping in view the above, it is prayed that the addition made by the Ld. AO, as sustained by the Id. CIT(A) for the year under consideration, be deleted. ....
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....ecision in the case of Salomon v. Salomon & Co, 1897 AC 22 was pronounced in 1897; and indeed, it has always been the well-recognized principle of common law. 21. Further, mere ownership, parental control, management etc. of a subsidiary is not sufficient to pierce the status of their relationship. Reliance in this regard is placed on the judgment of Vodafone International Holdings B.V. v. Union of India [2012] 314 ITR 1 (SC). 22. Corporate veil in case of a company's having holding-subsidiary relationship may be lifted only if it can be established, as a matter of fact, that the subsidiary has acted in a particular transaction as an agent of the holding company or that there has been an abuse of the corporate form for wrongful purpose or where tax is sought to be evaded or there is an attempt to circumvent tax obligation or to perpetrate fraud. 23.In absence of any allegation that the amount paid is unreasonable or there is an attempt to evade tax, the disallowance under the provision of section 40(a)(iib) cannot be made. 24. In view of the above submissions, it is prayed that the addition made u/s 40(a)(iib) be deleted." 10. Ld AR furthe....
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....5. We have heard the rival submissions and perused the record of the case. We have also gone through the written submissions filed by the assessee as well as the decision of the Tribunal in assessee's own case for the assessment year 2014-15 (supra). We find that there is no change in the facts and issue involved in this case. In the present year under consideration, the assessee has shown license fee payment of Rs. 151,90,00,000/- in its profits and loss account paid to the State Government of Odisha and view of the amended provisions of section 40(a)(iib) of the Act, the license fees paid to State Government is taxable in the hands of the assessee. While considering the said issue, this Tribunal has observed as under: "15. On a careful consideration of the rival submissions, we find that the assessee is a State Government Undertaking dealing in supply of wholesale foreign liquor, Indian made Foreign liquor and country liquor manufactured from molases for the whole of the State of Odisha. The assessee has shown payment of Rs. 100,80,00,000/- as license fees in its profit and loss account. We find that clause (iib) was inserted by the Finance Act, 2013 with effect from 1.4....
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....ding the provisions of section 40(a)(iib) of the Act. Accordingly, Ground Nos.1 to 5 of assessee devoid of any merits, is dismissed." 16. At the outset, we may point out that in the beginning of the arguments, ld counsel for the assessee, in all fairness, admitted that the appeal of the assessee for assessment year 2014-15 in ITA No.140/CTK/2018 under similar facts and circumstances and on the same issue, has been dismissed by this Bench and the assessee has preferred appeal before the Hon'ble Jurisdictional High Court. Ld CIT DR submitted that the facts and circumstances, the appeal for the assessee for A.Y. 2015- 16 are quite identical and similar, therefore, the issue is clearly covered in favour of the revenue by the order of the Tribunal dated 4.10.2019 (supra). 17. However, during arguments before us in this appeal, ld counsel has submitted written submissions, which has been reproduced in para 9 of this order. In these submissions, in paras 1 to 15, the assessee has reiterated the similar contentions which were raised in the appeal for assessment year 2014-15 and we have adjudicated and decided the same against the assessee by way of passing order dated 4.10.2019(supra....