Tasmac approaches HC against I-T’s demand of Rs 8,310 cr as tax

CHENNAI: Tamil Nadu State Marketing Corporation (Tasmac) approached the Madras High Court to set aside the notice issued by the Income Tax department demanding a tax of Rs 8,310.07 crore for the financial year of 2016-2017.

When hearing the appeal by Tasmac, a division bench of Madras High Court consisting of Justice R Mahadevan and Justice Mohammed Shafiq issued notice to the I-T department to file a response on the appeal preferred by Tasmac.

The state-run liquor monopoly sought direction to set aside the order passed by Justice R Suresh Kumar in March.

The single judge allowed the assessment order of the IT department and directed Tasmac to approach the appellate authority under the IT Act, 1951.

The main contention of the Tasmac was that the assessment officer erroneously included Rs.14,000 crore which was paid as the Value Added Tax (VAT) in 2016-2017 to the State government as the taxable income. Nevertheless, the I-T department submitted that as per law the undertakings of the State government should pay the tax for their income.

The tax department further drew the attention of the judges submitting that to circumvent the settled law, the state government is taking the profit of the Tasmac in the name of levying charges called special privilege fees.

“In order to avoid such tactics, an amendment was brought in the IT Act by placing Section 40a (ii) (b) to note that the deduction will not be allowed in case the state government is absorbing the profit of its undertakings by levying any charge on the corporation/undertakings, ” the I-T added.

While filing the IT returns for the 2016-2017 year, Tasmac declared that it had incurred a loss of Rs 11 crore. The corporation stated that the loss was due to the State's move of increasing the VAT to the exorbitant rate on liquor through an amendment in the VAT Act in 2013.

According to the Tasmac, the State increased the VAT tax on liquor from 38 per cent to 270 per cent. However, the I-T department rejected the claim and issued the show cause notice considering Rs 14,000 crores paid as VAT by the corporation as a taxable income and assessed Rs 8,310.07 crore of income tax.