2016 (7) TMI 283 - HC - VAT and Sales Tax

Sale of Wind Mill - slump sale - claim of exemption under TNVAT Act - it was stated that the petitioner has sold the Wind Mill during the year 2013-14 and not disclosed sale of Wind Mill in the Returns and paid the tax and the sale value of the Wind Mill was assessed and tax was proposed to be assessed at 5% on the said sale value. - Held that - Assessing Officer has misdirected himself in not properly appreciating the scope of the documents produced by the petitioner. The petitioner s case is that the sale of Wind Mill is a slump sale based on the Business Transfer Agreement dated 24.3.2014. Therefore, the Assessing Officer has to consider the entire agreement which contains various Schedules and in Schedule No.4 of the agreement, the list of immovable properties have been shown. Similarly, in Schedule-5, the list of Wind Mills have been shown. This Business Transfer Agreement read with Sale Deeds as well as other records would show that the entire establishment has been transferred as such. If that be the case, the petitioner s contention ought to have been accepted. Order quashed - Matter remanded back to AO - Decided in favor of assessee.

Summary

Issues:
Challenge to assessment order under TNVAT Act for the assessment year 2013-14 based on discrepancies in the sale of Wind Mill and tax assessment at 5%.

Analysis:
The petitioner, a registered dealer under TNVAT Act, challenged an assessment order dated 17.05.2016 regarding the sale of Wind Electrical Energy to Tamil Nadu Electricity Board. The respondent alleged discrepancies in the sale of Wind Mill during 2013-14, not disclosed in returns, proposing tax assessment at 5% on the sale value. The petitioner claimed the sale as a 'slump sale' and objected to the tax levy, citing a Business Transfer Agreement dated 24.03.2014 transferring the Wind Division to another company.

The petitioner submitted objections, emphasizing the 'slump sale' nature of the transaction and referenced a clarification stating no Stamp Duty was leviable on Wind Mills. Despite the petitioner's contentions and supporting documents, the respondent rejected the claims, citing lack of proof of Wind Mill disposal. The court noted the misdirection by the Assessing Officer in not considering the Business Transfer Agreement comprehensively, which indicated a transfer of the entire establishment.

Referring to a previous judgment involving a similar issue, the court highlighted the importance of determining whether a business was sold as a division or as a whole. The court emphasized that even the transfer of one line of business, like the windmill division, could amount to a transfer of the business as a whole. The court set aside the assessment order regarding Wind Mill disposal value and remanded the matter for fresh consideration by the respondent, directing a reassessment based on the legal principles outlined in the previous judgment.

The court quashed the penalty levy, emphasizing the need for a proper reassessment considering the legal precedents. The respondent was directed to redo the assessment in line with the court's directions, and the writ petition was allowed without costs, with connected petitions closed.