2016 (12) TMI 422 - HC - VAT and Sales Tax

Levy of sale tax - Sale of Aircraft (Asset) - three joint owners of asset - as per the memorandum of agreement dated 15.03.2011 between the parties for exit of the petitioner from the joint venture agreed to transfer, assign and relinquish of their share of 33.33% aggregating to 66 2/3% in the joint venture to M/s.Madras Cements Ltd., with equal shares - whether it was sale transaction and is liable to be taxed or merely relinquishment/release of the share in the joint venture and therefore cannot be taxed? Held that - The petitioner s case is that the transaction will not fall within the scope of the expression sale as defined in Section 2(33) of the TNVAT Act. Thus, the factual averments set out by the petitioner has to be examined by the respondent. For doing so, it is necessary that the joint venture agreement dated 10.09.2003, memorandum of agreement dated 15.03.2011 and other related documents should be gone into to interpret the intentions of the parties. Having failed to do so would render the findings recorded by the respondent in the impugned order as not tenable. In the counter affidavit, the grounds raised by the petitioner having not been met rather the counter affidavit is the re-presentation of the impugned assessment order. The matter is remanded to the respondent for fresh consideration, who shall take note of the observations made this order and re-do the assessment under the said head in accordance with law - appeal allowed by way of remand.

Summary

Issues:
Challenge to assessment order under TNVAT Act for the year 2010-2011 regarding the Sale of Aircraft (Asset).

Analysis:
In this case, a Public Limited Company challenged an assessment order under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) specifically concerning the Sale of Aircraft (Asset) for the year 2010-2011. The respondent issued a show cause notice to the petitioner regarding the sale of an aircraft jointly owned by three people, with the petitioner's share being taxed at 12.5% along with a penalty at 150%. The petitioner contended that the transaction was not a sale but a relinquishment or release of their share in a joint venture, supported by relevant documents such as the joint venture agreement and memorandum of agreement. The petitioner argued that the respondent failed to consider the joint venture agreement and related documents to interpret the true nature of the transaction, rendering the assessment findings untenable.

The petitioner's main argument was that the transaction did not fall within the definition of 'sale' as per Section 2(33) of the TNVAT Act. They emphasized that the respondent should have examined the joint venture agreement and related documents to understand the intentions of the parties involved before concluding that it was a sale. The court noted that the respondent's assessment order merely repeated the proposal in the show cause notice without delving into the factual aspects or the nature of the joint venture agreement. The court found that the respondent's failure to consider the relevant documents and the petitioner's contentions rendered the assessment order unsustainable.

As a result of the above analysis, the court allowed the writ petition, setting aside the findings related to the Sale of Aircraft (Asset) in the assessment order and remanding the matter to the respondent for fresh consideration. The court directed the respondent to carefully review the observations made in the order and re-do the assessment in accordance with the law. It was emphasized that the Assessing Officer should not solely rely on the Enforcement Wing's findings but independently assess the facts and contentions raised by the petitioner. The court concluded by stating that no costs were awarded, and the connected miscellaneous petition was closed.