1965 (11) TMI 108 - SC - VAT and Sales Tax

Whether a dealer who has been assessed to tax on the turnover of the previous year according to his election can change his option and elect the assessment year by filing quarterly returns with- out the previous sanction of Sales Tax Commissioner? Held that - Accept the appeal, and answer the question referred to the High Court in the affirmative. Judge (Revisions) was in error in holding that the assessee was not entitled to make an election under rule 39(1) without the sanction of the Sales Tax Commissioner, and the answer to the question referred to the High Court should be in favour of the assessee.

Issues:
Interpretation of section 7(1) of the U.P. Sales Tax Act, 1948 and rules 39, 40, and 41 of the U.P. Sales Tax Rules regarding the election of assessment year by a dealer without the sanction of Sales Tax Commissioner.

Analysis:
The judgment of the Supreme Court addressed the issue of whether a dealer could change their option and elect the assessment year by filing quarterly returns without the previous sanction of the Sales Tax Commissioner. The High Court of judicature at Allahabad had answered this question in the negative. The interpretation of section 7(1) of the Act, along with rules 39, 40, and 41 of the U.P. Sales Tax Rules, was crucial in determining the outcome of the case.

The appellant, represented by Mr. Sastri, argued that the rules should be interpreted to allow a dealer to elect to submit returns of the turnover of the assessment year instead of the previous year. He contended that the election mentioned in rule 39(1) was specific to filing returns of the assessment year. Mr. Sastri highlighted that rule 40 did not contradict this interpretation, as it pertained to dealers wishing to submit returns of the previous year. He emphasized that rule 41 applied to dealers who had elected to submit returns of the assessment year.

On the other hand, Mr. Agarwala, representing the State, argued that the Act and Rules provided a dealer with the option to file returns for the previous year or assessment year, which could only be exercised in the first taxable year. He relied on Form IV, which indicated the dealer's election to submit returns for the previous year or months of the assessment year. Mr. Agarwala also contended that once an option was exercised for the previous year, it could not be changed based on general principles.

The Supreme Court held that the Judge (Revisions) erred in concluding that the assessee needed the Sales Tax Commissioner's sanction to make an election under rule 39(1). The Court interpreted rule 39(1) as allowing a dealer to choose to be assessed based on the assessment year's turnover instead of the previous year. Rule 39(2) specifically referred to this election, indicating that a dealer could elect to be assessed on the assessment year's turnover. The Court found no provision barring the dealer from changing the election under rule 39(1), emphasizing that it was a statutory right that could not be overridden by general principles.

Additionally, the Court mentioned a previous judgment where the reasoning of the judgment under appeal had been questioned. Ultimately, the Court allowed the appeal, answered the question in favor of the assessee, and awarded costs to the appellant.

In conclusion, the Supreme Court's judgment clarified the interpretation of the Act and Rules concerning a dealer's election of the assessment year for tax assessment purposes, emphasizing the statutory right of the dealer to make such an election without the need for additional sanction.

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