1983 (10) TMI 278 - HC - VAT and Sales Tax

Summary

Issues:
1. Depreciation rate calculation discrepancy - 25% vs. 30%
2. Inclusion of sales tax realized in taxable turnover

Depreciation Rate Calculation Discrepancy - 25% vs. 30%:
The High Court addressed the grievance of the assessee regarding the depreciation rate calculation discrepancy. The Tribunal had allowed depreciation at 25% instead of the 30% to which the assessee was entitled. The Court referred to a previous case where it was held that there was no specific statutory provision for depreciation, and the Tribunal applied Income Tax Depreciation Rules. The Court noted that relevant rules regarding depreciation were not initially presented to the Tribunal but were now before the Court. The Court emphasized that the Tribunal erred in assuming that past depreciation rates automatically dictated the current rate. Consequently, the Court ruled in favor of the assessee, allowing depreciation at 30% instead of 25%.

Inclusion of Sales Tax Realized in Taxable Turnover:
The second issue revolved around whether the sales tax realized by the assessee should be included in the taxable turnover. The assessee contended that as per the U.P. Sales Tax Act, he was authorized to recover sales tax from customers and relied on a Supreme Court decision supporting this stance. However, the Tribunal had included the sales tax amount in the turnover based on a previous provision that has since been deleted. The Court analyzed the definition of turnover and the purpose of the deleted provision. It was clarified that the purpose was to ensure sales tax amounts were included in turnover but did not alter the turnover definition. Citing the Supreme Court precedent, the Court held that if a dealer is permitted to recover sales tax, that amount cannot be part of the turnover for sales tax levy purposes. The Court acknowledged the Department's argument but emphasized that only deductions allowed under Rule 44 could be subtracted from turnover. Consequently, the Court ruled in favor of the assessee, stating that the sales tax recovered should not be included in the taxable turnover.

In conclusion, the High Court allowed the revision, modifying the Tribunal's order to grant depreciation at 30% instead of 25%. Additionally, it ruled that the sales tax amount recovered by the assessee should not be included in the taxable turnover. The assessee was awarded costs amounting to Rs. 200.