1976 (3) TMI 91 - AT - Income Tax

Issues Involved:
1. Denial of exemption on a turnover of Rs. 1,32,210.
2. Addition of best judgment basis at Rs. 22,217.
3. Classification of goods for purposes of exemption.

Detailed Analysis:

1. Denial of Exemption on a Turnover of Rs. 1,32,210:
The appellant, a dealer in cattle feed, claimed exemption on certain turnovers based on notifications issued on 4th March 1974 and 23rd March 1974. The first notification exempted "cattle feed" from sales tax, while the second notification specified that only certain types of cattle feed (namely, rice bran, wheat bran, husk, and dust of pulses and grams) were exempt, explicitly excluding items like oil cakes and cotton seeds.

The tribunal found that the first notification, effective from 4th March 1974 to 22nd March 1974, exempted all cattle feed. Therefore, the appellant's sales of cotton seed oil cake, cotton seed husk, tapioca flour dust, and cotton seed hull bran during this period were exempt as they were considered "cattle feed" in trade. The turnover of Rs. 47,605 for this period was thus exempt.

For the period after 22nd March 1974, the second notification applied. The tribunal held that cotton seed oil cake was excluded from exemption as it fell under the category of "oil cakes." However, cotton seed husk, tapioca flour dust, and cotton seed hull bran were not explicitly excluded and were considered "cattle feed." Hence, the turnover of Rs. 21,994 for these items remained exempt.

2. Addition of Best Judgment Basis at Rs. 22,217:
The assessing authority added 10% to the disclosed sales due to discrepancies in the stock account and issues with the sale bills. The AAC reduced this addition to 2.5% of the disclosed sales, amounting to Rs. 22,217, citing improper maintenance of the stock account and lack of addresses in some sale bills.

Upon review, the tribunal found that the surviving defects-improper maintenance of the stock account and incomplete addresses in some sale bills-did not justify the rejection of accounts. Since the authorities did not question the gross profit, the tribunal deleted the addition of Rs. 22,217.

3. Classification of Goods for Purposes of Exemption:
The appellant's claim for exemption was based on the classification of goods as "cattle feed." The tribunal had to interpret the terms of the notifications to determine whether items like cotton seed oil cake, cotton seed husk, tapioca flour dust, and cotton seed hull bran qualified as "cattle feed."

For the period from 4th March 1974 to 22nd March 1974, the tribunal concluded that all the items in question were considered "cattle feed" and thus exempt under the first notification.

For the period after 22nd March 1974, the tribunal applied the second notification, which excluded oil cakes and cotton seeds from exemption. Consequently, the turnover of Rs. 62,411 for cotton seed oil cake was taxable. However, the tribunal held that cotton seed husk, tapioca flour dust, and cotton seed hull bran were not excluded and continued to be exempt, resulting in an exempt turnover of Rs. 21,994.

Conclusion:
The tribunal allowed the appeal in part, granting exemption for turnovers amounting to Rs. 69,599 and confirming the tax liability on Rs. 62,411. The addition of Rs. 22,217 on a best judgment basis was deleted, resulting in a revised taxable turnover of Rs. 91,816 at 3.5%.

← Previous Next →