ITAT deletes Income Tax Addition against Jharkhand State Beverages [Read Order]

The Ranchi Bench of Income Tax Appellate Tribunal ( ITAT ) deletes the Income Tax addition against Jharkhand State Beverages.

Jharkhand State Beverages Corporation Ltd. the assessee is only a Government corporation engaged in the business of distilling, manufacturing, procurement, import, export and supply of all kinds of alcoholic spirits, including IMFL, FMFL as well as country-made liquor. The assessee has shown in its tax audit report a net profit of 4.26% which is inclusive of interest income.

After excluding the interest income, the net profit comes to 3.54% which according to the assessing officer, is much less than the profit prevalent in the industry. According to the assessing officer, the margin should be 8% to 10% on bulk sales and 17% to 20% on retail sales but the assessee has shown a very low profit and accordingly applied a net profit of 15% on the gross turnover and assessed the income accordingly however the profit declared by the assessee was allowed to be reduced therefrom.

In the appellate proceedings, the CIT (A) partly allowed the appeal of the assessee by directing to reduce the GP rate applied by the assessing officer from 15% to 10%. The assessee corporation is a wholly owned body of the government of Jharkhand and it was engaged in doing wholesale marketing of IMFL/country liquor in terms of the mandate given by the State vide notification dated 07.10.2010.

Rinku Singh, CITDR for the assessee contended that as per the mandate of the Government of Jharkhand, the assessee can charge a Profit rate of 5% of wholesale supply of liquor in the state of Jharkhand and therefore submitted that both the authorities below have failed to appreciate this fact correctly which has resulted into creation of the huge demand on the assessee.

The Coram comprising, the accountant Member Rajesh Kumar and the Judicial Member Shri Sonjoy Sarma observed that “We note that the assessee is a Government body engaged in the wholesale marketing of IMFL/FMFL/country liquor in terms of Govt. direction and charging margin 5% as has been prescribed by the State Government. Therefore, we are not in a position to accept the conclusion as recorded by CIT (A) accordingly we set aside the order of CIT (A) and direct the assessing officer to accept the income of the assessee as returned. Accordingly, we allow the appeal of the assessee”.

Further held that the appeal filed by the revenue challenging the part relief allowed by the CIT (A) by reducing the rate of 15% to 10% becomes infructuous and accordingly dismissed.

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