1987 (3) TMI 504 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the validity of a notification under the Andhra Pradesh General Sales Tax Act, 1957 and Act 18 of 1985, Quashing of an assessment order by the third respondent, Dispute regarding sales tax on "parcel restaurant sales", Exemption granted to small hotels from payment of sales tax, Requirement of filing an affidavit for exemption, Claim for deduction of sales tax liability in income-tax assessments, Compliance with statutory provisions under section 41 of the Income-tax Act.

Analysis:
The petitioner, a private limited company, challenged the validity of clause (b) of a notification under the Andhra Pradesh General Sales Tax Act, 1957, seeking to declare it ultra vires and to strike it down. The petitioner also aimed to quash an assessment order by the third respondent. The dispute arose regarding the payment of sales tax on "parcel restaurant sales", with conflicting claims between the Commercial Tax Department and hoteliers. The Supreme Court had previously suggested exemptions for small dealers with turnovers less than Rs. 1 lakh during a specific period, leading to the Government's decision to exempt small hotels from sales tax payments. This exemption was extended to hotels with turnovers above Rs. 2 lakhs, subject to certain conditions.

The petitioner, a hotelier with an annual turnover exceeding Rs. 2 lakhs, filed an affidavit stating non-collection of tax on sales during a specific period but did not include certification regarding the non-claim of sales tax deduction in income-tax assessments. Consequently, the Commercial Tax Officer made an assessment without granting the exemption, leading to the present writ proceedings. The petitioner argued that due to uncertainties and previous rejections of claims, they had made provisions and claimed deductions in income-tax assessments. The court acknowledged the petitioner's predicament and directed them to offer the sales tax liability as income under section 41 of the Income-tax Act to comply with the statutory requirements.

In light of the above, the court directed the petitioner to file an affidavit offering the allowed liability in the income-tax assessment for a specific year for assessment under section 41 of the Income-tax Act. Upon filing such an affidavit, the Commercial Tax Officer was instructed to revise the assessment by exempting relevant sales during a particular period. The petitioner's sales tax liability for the assessment year in question was to be revised accordingly. The court also directed the endorsement of the order to the Commissioner of Income-tax for necessary actions to ensure compliance with section 41 of the Income-tax Act. The writ petition was disposed of with the provided directions, without costs incurred.