1983 (1) TMI 230 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of exemption under section 4-A of the U.P. Sales Tax Act for a reconstituted partnership firm.

Analysis:
The judgment by the Allahabad High Court revolved around the interpretation of the exemption granted under section 4-A of the U.P. Sales Tax Act for a reconstituted partnership firm. The case involved a partnership firm, M/s. Good Luck Rubber and Allied Industries, which underwent reconstitution during the period of exemption granted by the State Government. The main issue was whether the exemption continued to be available to the reconstituted firm after the partnership change.

The State Government had issued notifications granting exemptions to industrial units for a specified period. The first notification exempted the turnover of specific goods manufactured by industrial units, including M/s. Good Luck Rubber and Allied Industries, from sales tax for three years. A subsequent notification stated that the exemption would cease when the unit completed three years of production. The partnership firm was reconstituted during this exemption period.

The Commissioner of Sales Tax contended that the exemption ceased to be available to the reconstituted firm as it was considered a new juristic assessee. However, the court emphasized that the legislative intent behind section 4-A was to promote industrial development by granting exemptions to new industrial units, not necessarily to new assessees. The court referred to a previous judgment where it was held that the exemption granted to an industrial unit continued even after the reconstitution of the partnership firm running the unit.

Based on this interpretation, the court dismissed the revision filed by the Commissioner of Sales Tax. It was concluded that the reconstituted firm, which continued the industrial unit, was entitled to the benefit of exemption under section 4-A. The court highlighted that as long as the industrial unit remained operational, the exemption would continue, irrespective of changes in the partnership structure.

In summary, the judgment clarified that the exemption under section 4-A of the U.P. Sales Tax Act was tied to the industrial unit's operation and not solely dependent on the identity of the assessee. The court's decision favored continuity of exemption for the reconstituted partnership firm, emphasizing the promotion of industrial development as the primary legislative objective.