News Update

Milk production registers 20% growthSteel Industry seeks removal of Customs duty on raw materialsFake encounter - SC asks SIT to wrap up probe in 12 FIRs by Feb-endHaryana also bans release of ‘Padmavat’I-T - When doings of assessee are not found to be not above board, it does not deserve invocation of extraordinary jurisdiction of HC under Art 226: HCPublic art should be part of urban planning: PuriGSTN technical glitches to be reviewed by Sushil Modi-headed Committee tomorrowCX - Without canteen, factory would not be allowed to operate under Factories Act, 1948 - Outdoor catering services, not primarily for personal use or consumption of employee, is covered under definition of Input service: CESTATCENVAT - Services of merger has no relation with manufacture - Even if order goes beyond the SCN, same is not an error of a kind which can be rectified by a ROM application: CESTATSettle disputes of earlier regimeIndia-Israel talk - PM lists GST & transparent tax system as one of his Govt’s achievements; promises more reformsExports continue to grow; log 12.3% growth in Dec, 2017IT Minister launches gigabit link between India and LankaCustoms - CBEC classifies Antenna used at BTS under CTH 8517 62 90Nepal, B'desh, Bhutan & India about to close pax protocolDec, 2017 records 11.76 lakh foreign tourist arrivalsFATCA - CBDT issues fresh direction on US TIN for pre-existing accounts (See 'TII Brief')GSTIN, UIN/PAN suffices for KYC verification - Board simplifies normsTelecommunication Antenna used at Base Transceiver station/NodeB/eNodeB in a wireless telecommunication network is correctly classifiable under CTH 8517 6290I-T - A financial transaction within the family members is not covered by provisions of Sec 269SS: ITATe-Way Bill pilot to commence tomorrow; States to notify it for Intra-State before JuneST - Rule 6(3) of CCR, 2004 - Writing off of loans as non-performing assets, whether exempted service - Matter remanded: CESTATI-T - Benefit of exemption u/s 54F is not limited to investments made on claimants' name only: HC
 
Sales Tax - Whether when assessee is engaged in civil aviation sector, 'Dominant Activity' test is right criteria to decide taxability of incidental activity of sale of scraps - Matter referred to Larger Bench: HC

By TIOL News Service

NEW DELHI, SEPT 13, 2017: THE issue before the Bench is - Whether when the assessee is engaged in civil aviation sector, the 'Dominant Activity' test is the right criteria to decide the taxability of incidental activity of sale of scraps - Matter referred to Larger Bench.

Facts of the case

The assessee is engaged in the services of civil aviation, including the running of aircraft, ferrying of passengers and goods through air routes in both the domestic and international sectors. Till 1974, the assessee was registered with the Sales Tax Authorities as a dealer only in respect of its catering business and thereafter, only in relation to providing canteen facilities to its staff. The CCT thereafter sought to re-assess its returns on account of sales made by it in respect of unserviceable aircraft and unserviceable stores and spare parts arising in the course of its main activity, namely civil aviation. On appeal, the Tribunal upheld the reassessment by holding that the said transactions of sales were incidental and ancillary to or in connection with the assessee's 'business' as an airline, and hence, the assessee was a dealer 'qua the sale of old aircrafts/scraps'.

On reference, the HC held that,

++ the question that arises is whether the assessee is a ‘dealer’ which is ‘carrying on business of selling goods in Delhi’ in respect of the scrap including old and unserviceable aircraft, spare parts and other materials. The cases cited before this court deal with different modes of transportation, namely, road, rail and air. The services offered by all these entities include transportation of passengers and goods. In respect of Railways, the consistent view of the Supreme Court as well as the laws of Bombay and Madhya Pradesh is that the Railways is amenable to tax on the sale of spares, scrap etc. However, the DTC decision of this Court takes a contrary view in respect of road transport following the decision of the Andhra Pradesh High Court while disagreeing with the views of the High Courts of Madras and Madhya Pradesh;

++ the decision in DTC case is in the context of road transport. It was related to the context of the DTC being a statutory corporation. The present is a case of company, which has ceased to be a statutory corporation. The activity of operating aircrafts to carry passengers and cargo is no doubt a commercial activity but it is not the ‘business’ for which the assessee is registered as a dealer under the DST Act. However, the sale of scrap is not merely occasional but a regular and routine activity which will continue so long as the assessee continues to provide air transportation services. The important question thus, is whether the ‘dominant activity’ test would be a relevant criteria for determining whether u/s 2(c)(ii), the sale of scrap constitutes 'business'. This question does not appear to have arisen in the context of air transport earlier. It appears to the Court that the decision in DTC will need to be reconsidered. In the light of the above discussion, the question of law which might involve a reconsideration of the judgment of the Division Bench of this Court in DTC, is placed before larger bench.

(See 2017-TIOL-1866-HC-DEL-CT)


POST YOUR COMMENTS