1976 (3) TMI 90 - AT - Income Tax

Summary

Issues:
1. Dispute over addition of Rs. 1,65,841.63 at 3 1/2 per cent in taxable sales under s. 36(1) of the Tamil Nadu General Sales Tax Act, 1959 for the assessment year 1973-74.
2. Classification of purchases as multi-point goods and their taxability.
3. Determination of tax liability on resale of purchased goods.

Detailed Analysis:

1. The appellant, a dealer in iron and steel, contested the addition of Rs. 1,65,841.63 at 3 1/2 per cent in taxable sales, claiming the difference between total and taxable sales as second sales of iron and steel. The assessing authority treated certain purchases as multi-point goods, adding 34.4 per cent profit to arrive at the taxable sales figure. The appellant argued that these purchases were also iron and steel, rightfully considered second sales. After an unsuccessful appeal before the AAC, the appellant approached the ITAT for a second appeal.

2. Regarding the first and second items of purchases described as centering sheets, the ITAT analyzed whether these items fell under the iron and steel category for taxation purposes. The purchases were labeled as "M.S. Fabricated Centering Sheets," and it was noted that these fabricated sheets did not align with the sub-entries under iron and steel. The ITAT concluded that the fabricated centering sheets were distinct iron and steel products, not falling under the single-point taxation entry. Hence, these purchases were to be assessed on a multi-point basis.

3. For the third item of purchase, cover sheets described as scrap, the ITAT found the appellant on stronger ground. The goods were explicitly identified as scrap in the auction notice, falling within the iron and steel category specified in the tax schedule. As the appellant had only resold the scrap without further processing, the resale was not subject to tax. The ITAT clarified that the mere application of a multi-point tax rate by the seller did not alter the nature of the goods as scrap. Consequently, the appellant was not liable to tax on the resale of the purchased scrap.

4. The ITAT determined that the appellant's tax liability was limited to the sale value of specific purchases, excluding those involving fabricated centering sheets. Adjustments for stock turnover were deemed unnecessary, except for purchases from Murray & Co., where only a portion of the goods had been resold. Ultimately, the ITAT confirmed an addition of Rs. 38,759.74 in taxable sales, granting relief of Rs. 1,27,081.89 at 3 1/2 per cent to the appellant.