RELIANCE RETAIL LTD Vs STATE OF PUNJAB: PUNJAB AND HARYANA HIGH COURT (Dated: April 5, 2017)
Punjab Value Added Tax Act, 2005 - Section 13(3) - Punjab Value Added Tax Rules, 2005 - Rule 20.
Keywords - Amalgamated - gold - input tax credit - jewellery - job work.
The petitioner is a dealer duly registered under the provisions of the Act as well as under the provisions of the CST Act, 1956 at Mohali (Punjab). The petitioner was amalgamated with M/s Reliance Fresh Ltd. and it changed its name to M/s Reliance Retail Ltd. The petitioner carries on its business of the manufacturer and sale of jewellery. It is entitled to Input Tax Credit (ITC) of the tax paid on purchase of gold used in the manufacture of jewellery. The petitioner filed returns for the AY 2008-09 in which it claimed ITC in respect of the gold purchased during that year and adjusted the admissible tax credit against its output tax liability and carried forward the balance tax credit to the next year. The respondents by a notice called upon the petitioner to show cause why penalty and interest be not imposed upon it u/s 56 and 32 of the Act. The notice stated that ITC on purchases amounting to about Rs. 8.23 crores was liable to be rejected as it was not in accordance with Rule 20 r/w Section 13(3) of the Act. The respondents imposed tax, penalty and interest. The FAA -DETC(A) dismissed the appeal. The VAT Tribunal, Punjab also dismissed the appeal. The Tribunal noted that during the AY 2008-09, the petitioner claimed ITC on purchase of bullion of the value amounting to Rs. 24,57,78,897/-. However, bullion worth Rs. 8,23,326.38 was not received back by the petitioner from the job workers after it was processed and reconditioned within the period of 90 days stipulated in Rule 20 of the said Rules.
Having heard the parties, the High Court held that,
Whether claim of assessee for Input Tax Credit can be rejected merely on the ground that the goods sent to job worker were not received back within a period of 90 days as stipulated by Rule 20 particularly when such Rule is directory and not mandatory - NO: HC
++ the reason for prescribing a time limit albeit directory is to ensure that the goods returned by the job workers after processing are the same as the goods that were sent by the taxable person for further processing on job work basis. The importance of the identity of the goods is obvious for the ITC was claimed in respect of those goods. If the goods returned by the job workers after processing are different from and less in value, than the goods sent for processing on job work basis, the taxable person would in effect be availing the ITC of a higher value than it was entitled to. Prescribing a time limit only makes it easier for the Department to ascertain whether the goods returned by the job workers after processing are the same as the goods that were sent by the taxable persons to the job workers for processing/further processing. Rule 20 is, therefore, not ultra-vires Section 13(3) or otherwise invalid. Having said that, however, it must be held that the period of 90 days prescribed in Rule 20 is only directory and not mandatory. Once it is held that the period of 90 days is only directory, the authorities must not consider themselves bound by any rigid time-frame or any specific period. There is no warrant for holding that the goods sent must be returned by the job workers during the same assessment year. That is not contemplated by Rule 20. The period of 90 days is not confined to the same assessment year. In the circumstances, the challenge to Rule 20 insofar as it prescribes the time limit of 90 days is rejected. It is, however, held that the same is directory and not mandatory. The Tribunal, therefore, applied the wrong test in determining whether the goods were returned in a reasonable time or not. It would be necessary, therefore, for the Tribunal to decide the question afresh in accordance with this judgment.
Petition disposed of
2017-TIOL-726-HC-AP-IT
C NANDA KUMAR Vs UoI: ANDHRA PRADESH HIGH COURT (Dated: March 13, 2017)
Income Tax - Section 194LA - Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Section 46 & 96
Keywords - Circular - compensation - land acquisition - tax at source
The petitioners in these writ petitions owned certain lands. Those lands were acquired by the Government under the Hyderabad Metro Rail Project. The acquisition was in terms of the provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. After awards were passed, the competent authority started disbursement of compensation, without deducting tax at source u/s Section 194LA of the Income Tax Act, 1961. Tax was not deducted at source in view of Section 96 of 2013 Act. But the CIT (TDS) issued a Circular to the District Collector calling upon him to deduct tax at source while making payment of compensation under the 2013 Act, on the ground that as per the decision of the Kerala High Court in Kochi Metro Rail Ltd. v. Union of India, Section 96 of the 2013 Act would not override the provisions of Section 194LA of the Income Tax Act, 1961. Therefore, challenging the said Circular of the CIT (TDS), the land owners have come up with the first two writ petitions. Subsequently, the CBDT issued a Circular bearing No.36/2016, clarifying that the compensation received under an award exempted from the levy of income tax u/s 96 of the 2013 Act shall not be taxable, even if there is no specific provision for exemption under the Income Tax Act, 1961. Therefore, one set of land owners whose lands were acquired have come up with the 3rd writ petition seeking a mandamus not to deduct tax at source, in terms of the Circular of the CBDT.
Having heard the parties, the High Court held that,
Whether tax at source u/s 194LA is liable to deducted on compensation received for acquisition of land by the Government when Section 96 of Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 makes such deduction inapplicable to the compensation so received - NO: HC
++ the entire scheme of Chapter-XVII of the Income Tax Act, 1961, as indicated by Section 190(1) is the payment of tax on income, by way of deduction or collection at source. Chapter-XVII in entirety is about deduction or collection and recovery of tax. This is why Section 190(1) of the Act speaks only about tax on income. If there can be no tax on a particular income by virtue of some special provisions contained in an enactment other than the Income Tax Act, 1961, it is not known how any provision contained in Chapter-XVII of the Income Tax Act could be invoked. The emphasis u/s 190(1) is on the tax on such income. What follows from Sections 192 onwards are actually deduction or collection at source or advance payment of tax on income. Once this is clear, we will have no difficulty in concluding that Section 96 of the 2013 Land Acquisition Act makes Section 194LA of the Income Tax Act, 1961, inapplicable to the compensation paid under the award. The last few words of the substantive part of Section 194LA of the Income Tax Act, 1961, also makes it clear that the nature of the deduction was income-tax. Section 96 mandates that no income-tax shall be levied on any award made under the Act except u/s 46. Section 46 deals with the purchase of land by a person other than a specified person through private negotiations. The benefit of Section 96 is not available when a land is purchased through private negotiations by a person other than a specified person u/s 46(1). Therefore, in cases other than those covered by Section 46 of the 2013 Land Acquisition Act, the levy of income-tax is barred by Section 96 and as a consequence, the deduction or collection under Section 194LA of the Income Tax Act, 1961, is impermissible.
Petitoner's writ petition allowed
