2006 (9) TMI 531 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of assessment under section 5A of the Kerala General Sales Tax Act, 1963 on the value of old gold ornaments brought by partners of a firm towards capital.

Summary:
The High Court of Kerala considered the question of whether the Tribunal was justified in upholding the assessment under section 5A of the Kerala General Sales Tax Act, 1963 on the value of old gold ornaments brought by partners of a firm towards capital. The firm treated the old ornaments as trading stock, remade them into new ornaments, and sold them as part of the stock-in-trade. The assessing officer initially treated the transaction as a purchase, but the first appellate authority canceled the assessment. However, the Tribunal, after considering the facts and Explanation (3D) to section 2(xxi) of the Act, reversed the order of the first appellate authority and sustained the assessment under section 5A. The Court distinguished a previous decision and held that the transfer of goods by a partner to the firm as capital contribution does not attract tax liability under section 5(1) but will attract tax under section 5A as the firm treated the goods as stock in trade and sold them in the course of business. Therefore, the Court confirmed the Tribunal's order and dismissed the revision case.