*Kerala State Beverage Manufacturing & Marketing Corporation Limited Vs ACIT, Circle 1(1)*
*Forum-Supreme Court*
*Date-3/1/2022*

*Sub-Whether surcharge on sales tax is liable to be disallowed u/s 40(a)(iib) of Income-tax Act,1961.*

The Supreme Court of India allowing the appeal of the State Government undertaking by allowing the arguments of Senior Advocate S Ganesh that the ‘fee’ or ‘charge’ as mentioned in Section 40(a)(iib) is clear in terms and that will take in only ‘fee’ or ‘charge’ as mentioned therein or any fee or charge by whatever name called, but cannot cover tax or surcharge on tax and such taxes are outside the scope and ambit of Section 40(a)(iib)(A) and Section 40(a)(iib)(B) of the Act. A reading of preamble and Section 3(1) of the KST Act, make it abundantly clear that the surcharge on sales tax levied by the said Act is nothing but an increase of the basic sales tax levied under Section 5(1) of the KGST Act, as such the surcharge is nothing but a sales tax. It is also settled legal position that a surcharge on a tax is nothing but the enhancement of the tax. Thus while allowing the appeal on this point, another point regarding the gallonage fee, license fees etc was decided against the assessee.

Ramesh Patodia
03-01-2022