1980 (8) TMI 192 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 4(5) of the Orissa Sales Tax Act regarding the liability to pay tax for a new business.
2. Determination of whether the burden of proof lies on the assessee to establish that a new business is separate from the existing business.

Analysis:

1. The case involved the registration of two businesses, M/s. Karsan Rice Mills and M/s. Laxman Fertilisers, by the same individual. The assessing officer applied section 4(5) of the Orissa Sales Tax Act to assess the turnover of the new business. The Tribunal held that the new business was an additional business of M/s. Karsan Rice Mills and thus liable to pay tax from the date of commencement. The Tribunal emphasized that the burden was on the proprietor of the new business to prove that it was started independently of the funds of the joint family business. The Tribunal's decision was based on the lack of evidence provided by the assessee to establish the separation of the two businesses.

2. The High Court disagreed with the Tribunal's decision and highlighted that there was no presumption in law that an individual coparcener's business belongs to the Hindu Undivided Family (H.U.F.). The Court noted that the burden of proof lies on the party alleging that the business belongs to the H.U.F. The Court criticized the Tribunal for placing the burden on the assessee to prove the separation of the businesses, stating that the department should have provided evidence to support its claim that the new business also belonged to the H.U.F. The Court emphasized that the certificate of registration clearly indicated the business as that of an individual coparcener, and there was no material to support the claim that the H.U.F. was the proprietor of the new business. Consequently, the Court held that the Tribunal erred in its decision and answered the referred question in favor of the assessee.

3. In conclusion, the High Court's judgment clarified the burden of proof regarding the ownership of a business and criticized the Tribunal for incorrectly placing the burden on the assessee. The Court emphasized the importance of evidence and documentation in establishing the ownership and separation of businesses for tax liability purposes. The judgment provided clarity on the interpretation of section 4(5) of the Orissa Sales Tax Act and highlighted the necessity for proper evidentiary support in tax assessments involving multiple businesses owned by the same individual.