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  • Where State Government undertaking is engaged in wholesale and retail trade of beverages within State, levy of Gallonage Fee, Licence Fee and Shop Rental (kist) with respect to FL-9 licences granted with respect to wholesale of foreign liquor will clearly fall within purview of Section 40(a)(iib) and, hence, amount paid in this regard is liable to be disallowed while similar amounts paid with respect to FL-1 licences granted with respect to retail business in foreign liquor is not an exclusive levy on appellant and, hence, not liable to be disallowed; Surcharge on sales tax and turnover tax is not a 'fee or charge' coming within scope of Section 40(a)(iib) and is not an amount which can be disallowed under said provision

Where State Government undertaking is engaged in wholesale and retail trade of beverages within State, levy of Gallonage Fee, Licence Fee and Shop Rental (kist) with respect to FL-9 licences granted with respect to wholesale of foreign liquor will clearly fall within purview of Section 40(a)(iib) and, hence, amount paid in this regard is liable to be disallowed while similar amounts paid with respect to FL-1 licences granted with respect to retail business in foreign liquor is not an exclusive levy on appellant and, hence, not liable to be disallowed; Surcharge on sales tax and turnover tax is not a 'fee or charge' coming within scope of Section 40(a)(iib) and is not an amount which can be disallowed under said provision

  • Vide Decision of High court of Kerala in Kerala State Beverages (Manufacturing and Marketing) Corporation Limited Vs. Assistant Commissioner of Income Tax.

Facts of the case:

  1. Appellant is a company registered under the Companies Act, engaged in wholesale and retail trade of beaverages within the State of Kerala, and is a 'State Government Undertaking' falling within the 'Explanation' provided under section 40(a)(iib) of the Income Tax Act, 1961.
  2. It is engaged in wholesale and retail trade of beverages within State of Kerala - Assessee is holding FL-1 Licence with respect to sale of foreign liquor in sealed bottles, without privilege of consumption within premises. hey are also having FL-9 Licence for wholesale of foreign liquor, which they are selling to FL-1, FL-3, FL-4, 4A, FL-11, FL-12 licence holders.
  3. Question arose as to whether Gallonage Fee, Licence fee, Shop rental (Kist) and Surcharge on sales tax and turnover tax, with respect to which debits were made by assessee in their Profit and Loss Account, are liable to be disallowed while computing income derived as "profit and gains of business or profession", under Section 40(a)(iib), by treating them as amounts paid by assessee "by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge by whatever name called, which is levied exclusively on" assessee.

Judgement:

The honourable High Court of Kerala held the case as follows:

  1. levy of Gallonage Fee, Licence Fee and Shop Rental (kist) with respect to FL-9 licences granted to appellant will clearly fall within purview of Section 40(a)(iib) and amount paid in this regard is liable to be disallowed.
  2. Amount of Gallonage Fee, Licence Fee, or Shop Rental (kist) paid with respect to FL-1 licences granted in favour of appellant, with respect to retail business in foreign liquor, is not an exclusive levy on appellant, which is a State Government undertaking.
  3. Therefore disallowance made with respect to those amounts cannot be sustained.

Surcharge on sales tax and turnover tax is not a 'fee or charge' coming within scope of Section 40(a)(iib) and is not an amount which can be disallowed under said provision - Therefore, no disallowance can be made in this regard.

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