KERALA STATE BEVERAGES M&M) CORPN LTD,TRIVANDRUM vs. THE ACIT, CIR-1(1), TRIVANDRUM

In the interest of justice, the slight delay of three days in filing the present appeal is condoned.

The only issue that arises for our consideration in the present case is whether the stock transferred to the warehouse of the assessee by the Excise Authorities due to the change in the Abkari Policy of the Government of Kerala is the stock of the assessee.

The brief facts of the case pertaining to this issue, as emanating from the record: The assessee is engaged in wholesale and retail trading in beverages. For the year under consideration, the assessee filed its return of income on 17-10-2016, declaring a total income of Rs. 53,49,88,940/-. Subsequently, the assessee filed the revised return of income on 31-03-2018,returning an income of Rs. 60,87,61,120/-. The return filed by the assessee was selected for scrutiny, and statutory notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee has classified an amount of Rs. 12.32 crores as “due from Govt. of Kerala (Bar License)”. During the assessment proceedings, theassessee submitted that this amount is due from the Government, since the amount was paid to different parties to buy back the stock of beverages during the period of state state-imposed prohibition. The

The Ld.CIT(A), vide impugned order,dismissed the appeal filed by the assessee on this issue and held that the stock implied to be held by the assessee as its own stock and the State Government never meant to take back the liquor stock from the assessee. Thus, the Ld.CIT(A) held that the stock was the property of the assesseeand the assessee was duty-boundto add the stock to its closing stock. Being aggrieved, the assessee is in appeal before us.

During the hearing, the Ld.AR submitted that the amount paid to the bar owners was pursuant to the Government order for buyback of stock of beverages,and the assessee was not the owner of the stock and was acting merely as an agent.

On the other hand, the Ld.DR vehemently relied on the order passed by the lower authorities.

We have considered the submissions of both sides and perused the material available on record. In the present case, on the basis that the assessee has classified an amount of Rs.12.32 crores as due from the Government of Kerala and the stock that has been bought back was not included in the booksof the assessee, the AO added the stock to the closing stock of the assessee. As per the assessee for the FY. 2015-16, the Government of Kerala cancelled the licenses of all Barsof hotels except those of five-star hotels as per the new Abkari Policy of the Government. It is the plea of the assessee that on 31-03-2015, the Commissioner of Excise, Government of Kerala issued directions to close down the Bars of the hotels, except those having five-star hotels and freeze the balance stock of the liquor kept in those hotels immediately. From the perusal of the said directions dt. 31-03-2015, issued by the Commissioner of Excise, Government of Kerala, forming part of the Paper Book, we find that directions were also issued to make necessary arrangements for the transfer of stock of the liquor to the concerned warehouse of the assessee. As per the assessee, when the stock was taken back by the Government, the bar owners approached the Governmentfor the price of the liquor taken from them. As the Government was having financial

Therefore, having perused the documents placed on record by having perused the documents placed on record by having perused the documents placed on record by the assessee, we find merit in the we find merit in the submission of the assessee that submission of the assessee that it acted merely as an intermediary between the acted merely as an intermediary between the bar owners and the bar owners and the Government of Kerala Government of Kerala for the transfer of liquor stock and for the transfer of liquor stock and disbursement of payment disbursement of payment under the directions of the Government. under the directions of the Government. Thus, from the various directions from the various directions issued by the Government of issued by the Government of Kerala/Excise Department Kerala/Excise Department, it is clear beyond doubt that it is clear beyond doubt that the assessee had no ownership over the stocks had no ownership over the stocks of liquor kept in its warehouse of liquor kept in its warehouse facility and the complete ownership of the liquor facility and the complete ownership of the liquor remained with the remained with the Government of Kerala Government of Keralathroughout the process. Before concluding, it is Before concluding, it is further pertinent to note that further pertinent to note that part of the stock in the assessee’s in the assessee’s warehouse was also destroyed warehouse was also destroyed vide an order dt. vide an order dt. 14-03-2023, pursuant to the directions issued by the Commissioner of Excise, pursuant to the directions issued by the Commissioner of Excise, pursuant to the directions issued by the Commissioner of Excise, Kerala. Therefore, the impugned addition of Rs. 12,32,57,000/ the impugned addition of Rs. 12,32,57,000/ the impugned addition of Rs. 12,32,57,000/- by adding the stock to the closing stock of the assessee is deleted adding the stock to the closing stock of the assessee is deleted adding the stock to the closing stock of the assessee is deleted.

In the result, the appeal by the assessee is allowed.