2015 (8) TMI 1183 - HC - VAT and Sales Tax

Taxability of Compact Disc Electronic good or not AO levied tax at 10% by treating compact discs as unclassified items Assesse claimed that compact discs are electronic goods, so tax leviable at 5%, as per Office Memorandum No. 2-2375/11-9(251)-97 Order of AO was upheld by tribunal Held that - In list, at item Nos. 28 and 29, audio cassettes (blank) and audio cassette (duplicate) are mentioned When audio cassette is electronic item, then certainly, compact disc is also electronic item Moreover, in both items, electronic magnetic has been used There is no utility of compact disc independently It become useful only in music system/equipment Hence, same will have to be treated under category of electronic goods Impugned orders hereby set aside Decided in favour of assessee.

Summary

Issues:
1. Classification of compact discs for tax purposes under the U. P. Trade Tax Act, 1948.

Analysis:
The judgment by the Allahabad High Court involved the classification of compact discs for tax purposes under the U. P. Trade Tax Act, 1948. The assessee, engaged in the sale of electronic items, specifically audio cassettes or audio compact discs, disputed the tax rate applied by the Assessing Officer (AO) at 10%. The assessee argued that compact discs should be considered electronic goods and taxed at 5% based on an Office Memorandum from 1981. However, the AO did not accept this argument, a decision upheld by the first appellate authority and the Trade Tax Tribunal. The High Court considered the contention that since audio cassettes were classified as electronic items in a notification, compact discs, which also use electronic magnetic, should be treated similarly. It was further argued that compact discs are essential parts of electronic systems and have no utility independently, supporting their classification as electronic goods.

The High Court, after hearing arguments from both sides, set aside the previous orders and ruled in favor of the assessee. The court concluded that compact discs should be considered under the category of "electronic goods," granting relief to the assessee. As a result, all the revisions filed by the assessee were allowed, overturning the previous decisions and providing a favorable outcome in terms of tax classification for the compact discs.