The Commissioner of Income Tax, vs. M/S Vijayasagar Wines,

THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND THE HONOURABLE SRI JUSTICE N. RAVI SHANKAR

ITTA No. 455 of 2011

Dated: 21-06-2012

Between Commissioner of Income Tax Vijayawada

…Appellant And

M/s Vijaysagar Wines, Ramavaram Kothagudem. …Respondent

Judgment: (Per Hon’ble Sri Justice Goda Raghuram)

Heard Sri J.V.Prasad, learned Senior Counsel for Income Tax for the appellant and Sri K.Vasanth Kumar, learned counsel for the respondent-assessee. The appeal is preferred by the Revenue under Section 260-A of the Income Tax Act, 1961 (for short ‘the Act’), aggrieved by the order dated 8-2-2007 of the Income Tax Appellate Tribunal (for short ‘the Tribunal’), Hyderabad-A Bench rejecting the Revenue’s appeal ITA No. 1082/Hyd/2006. The Revenue had preferred the appeal to the Tribunal against the order passed by the CIT, Vijayawada. The CIT by the order dated 28-8-2006 had allowed the assessee’s appeal preferred against an order passed by the Assessing Officer under Section 143(3) of the Act in relation to the Assessment year 1998-99.

The respondent-assessee is engaged in the business of vending liquor. In the return of income for the Assessment year 1998- 99 he claimed status as a firm and declared income of Rs.24,880/-. The return was processed under Section 143(1) of the Act; thereafter notice dated 28-3-2005 was issued under Section 148 of the Act; and eventually the assessment was completed under Section 143(3) of the Act on a total income of Rs.1,11,510/- and a demand of Rs.36,845/- was raised. The CIT had held in allowing the appeal and reversing the order of the Assessing Officer that though the liquor business licence was obtained in the name of an individual partner and the business however carried on along with other partners in the status of a firm and in contravention of the provisions of the A.P. Excise Act, 1968, the return could be assessed by the firm and interest and remuneration

payable to the partners could be allowed. For this conclusion, the CIT relied upon its earlier orders, passed by the same authority.

The Revenue’s appeal thereagainst, as already noticed was rejected by the Tribunal.

It is brought to our notice that this Court in Commissioner of Income Tax vs. Swarna Bar and Restaurant[1] has held that since Section 15 of the A.P. Excise Act,1968 prohibits any person from selling or purchasing intoxicating liquor except in accordance with the terms and conditions of a licence granted; and where a licence is granted only in favour of an individual, it was only the individual who is entitled to carry on business in the purchase and sale of intoxicating liquor and no firm could carry on such business save with the prior permission of the Commissioner of Prohibition and Excise. This Court held that in such circumstances the assessee could not be assessed as a firm with consequent benefits. It is contended by Sri J.V.Prasad that in view of the decision of this Court in Swarna Bar (supra) this appeal by the Revenue requires to be allowed as the order of the Tribunal rejecting the appeal and confirming the order of the CIT is unsustainable and contrary to the law declared supra. The learned counsel for the assessee Sri K.Vasanth Kumar does not contest the fact that the issue is governed by the decision of this Court in Swarna Bar (supra).

In the circumstances, we hold that in view of the judgment in Swarna Bar (supra) the respondent-assessee could not be assessed as a firm. The appeal is accordingly allowed. The order of the Tribunal dated 8-2-2007 in ITA No. 1082/Hyd/2006 confirming the order of the CIT dated 28-8-2006 is set aside as is the order of the CIT dated 28-8-2006. The order of the Assessing Officer dated 13-3-2006 is restored. There shall however be no order as to costs.

__________________________

GODA RAGHURAM, J

21st June, 2012 _________________________ N. RAVI SHANKAR, J GRR

[1] (2011) 334 ITR 387 (AP)