2014 (5) TMI 96 - HC - VAT and Sales Tax

Tax liability - Brick Klin Applicability of Compounding scheme to Transferee firm - Whether transfer of stock by assessee to M/s Rajvir Brick Field could have been treated to be a sale and excluded from compounding admitted by assessee as also the transferee firm, for both seasons, namely, 1999-2000 and 2000-01 - During season 1999-2000 (01.10.1999 to 31.09.2000) assessee was under compounding scheme for which order was passed on 30.09.2000 - The subsequent firm M/s Rajvir Brick Field was also in compounding for the reason 2000-2001 (01.10.2000 to 30.09.2001). Question has to be answered against assesse - A compounding scheme is always applicable to individual firm and stock thereunder is not transferable unless treated to be sale - Admittedly, the assessee accepted compounding in season 1999-2000 and for season 2000-01 it claims that business was taken by M/s Rajvir Brick Field, which also accepted compounding for next seasons, i.e., 2000-01 - However, the stock which remained with assessee after completion of season 1999-2000 and passed on to next season, in respect thereof it was incumbent upon assessee to go for compounding or to show the same in his records properly but taking advantage of compounding accepted by a different firm, tax liability in respect of such stock could not have been denied - The Revenue has rightly treated transfer of stock to M/s Rajvir as sale on the part of assessee in an assessment year when there was no compounding admitted by assessee and, therefore, it has rightly been taxed - Decided against assessee.

Summary

Issues:
Tax liability dispute for Assessment Year 2000-01 under U.P. Trade Tax Act, 1948 - Transfer of stock by the assessee to another firm - Applicability of compounding scheme to transferred stock.

Analysis:

1. The case involved a tax liability dispute for the Assessment Year 2000-01 under the U.P. Trade Tax Act, 1948. The assessee, a brick kiln operator, had accepted a compounding scheme for the previous year and transferred the business to another firm for the current year.

2. The compounding scheme introduced by the State Government allowed for a fixed tax payment for brick kilns. The assessee had accepted compounding for the previous year and the new firm had also accepted compounding for the current year.

3. The issue arose when the Assessing Authority found a significant stock of bricks remaining after the transfer of business to the new firm. The Authority held the assessee liable for tax on the remaining stock, leading to a series of appeals and revisions.

4. The main legal question before the Court was whether the transfer of stock to the new firm could be treated as a sale and excluded from the compounding scheme admitted by both the assessee and the new firm for the respective seasons.

5. The Court held that the compounding scheme is applicable to individual firms, and the stock under the scheme is not transferable unless treated as a sale. The Court noted that the assessee had not properly accounted for the remaining stock after the end of the previous season.

6. The Court concluded that the transfer of stock to the new firm was rightly treated as a sale by the Revenue, as the assessee had not gone for compounding or shown the stock in records properly. Therefore, the tax liability on the transferred stock was upheld.

7. Consequently, the Court answered the legal question against the assessee and dismissed the revision, affirming the decision of the Revenue to tax the remaining stock transferred to the new firm.

This detailed analysis highlights the key legal and factual aspects of the judgment, emphasizing the application of the compounding scheme and the treatment of transferred stock in the context of tax liability under the U.P. Trade Tax Act, 1948.