ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-4, LUDHIANA, AAYAKAR BHAWAN vs. SHAKTI INDUSTRIES, -

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ITA 178/CHANDI/2024Status: DisposedITAT Chandigarh07 May 2025AY 2013-1415 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance made by the Assessing Officer under Section 40(a)(iib) was not justified. The Tribunal noted that the payments made by the assessee to the State Government were for obtaining mining leases and for the royalty paid on the extracted minerals. The Tribunal referred to the Explanation to Section 40(a)(iib) which clarifies that the provision applies to payments levied exclusively on a State Government undertaking by the State Government. In this case, the assessee is not a State Government undertaking, and the payments were made for statutory rights and mineral extraction, not as a levy exclusively on a State Government undertaking. Therefore, the CIT(A) was correct in deleting the disallowance. The appeal filed by the Revenue was dismissed.

What were the facts?

The appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 29.09.2023. The assessment year in question is 2013-14. The assessee is M/s Shakti Industries. The dispute arises from the disallowance made by the Assessing Officer (AO) under Section 40(a)(iib) of the Income Tax Act, 1961, concerning payments made to a state government. The CIT(A) had deleted this disallowance. The Revenue is challenging the deletion of this disallowance.

What were the issues?

1. Whether the disallowance made by the Assessing Officer under Section 40(a)(iib) of the Income Tax Act, 1961, on account of payments made by the assessee to the State Government is justified? Assessee's Contention: The assessee argued that the payments made to the State Government were not in the nature of royalty or any other charge that would attract the provisions of Section 40(a)(iib). They contended that these payments were for services rendered or for obtaining statutory rights, and therefore, not disallowable. Revenue's Contention: The Revenue argued that the payments made by the assessee to the State Government fell within the ambit of Section 40(a)(iib), which disallows deductions for amounts paid by way of royalty, license fee, service fee, privilege fee, service charge, or any other fee or charge, by whatever name called, which is levied exclusively on a State Government undertaking by the State Government. The Revenue contended that the nature of the payment warranted disallowance.

Which sections of the Income-tax Act were involved?

Section 40(a)(iib)

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अधिकरण, चण्डीगढ़ न्यायपीठ, चण्डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं/. ITA No. 178/CHD/2024 निर्धारण वर्ष / Assessment Year: 2013-14 | The ACIT, Vs | M/s Shakti Industries, Circle – 4, Ludhiana.

Jagera Road, Ludhiana. | स्थायी लेखा सं/.PAN NO: ABAFS2012H अपीलार्थी/Appellant

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