2013 (4) TMI 151 - HC - VAT and Sales Tax

Compounding under section 7-D of U.P Trade Tax Act - assessment framed under Rule 41(8) r.w.s. 7-D wherein AO has demanded a tax @ 1% towards State Development Tax - Held that - As decided in M/s Systematic Conscom Limited versus State of U.P & Others 2009 (3) TMI 872 - ALLAHABAD HIGH COURT the State Development Tax cannot be levied and realize from the contractors who have opted for compounding under section 7-D of the U.P Trade Tax Act. Thus merit in the contention of the petitioner that the State Development Tax could not levied upon it. In favour of assessee.

Summary

Issues:
1. Applicability of State Development Tax on a private limited company engaged in executing Civil and Electrical Works Contract.
2. Validity of the assessment order demanding tax under Rule 41(8) read with section 7-D of U.P Trade Tax Act.
3. Interpretation of the Division Bench decision in M/s Systematic Conscom Limited versus State of U.P & Others 2009 Tax Law Diary 105 regarding State Development Tax for contractors opting for compounding under section 7-D of U.P Trade Tax Act.

Analysis:
1. The petitioner, a private limited company engaged in executing Civil and Electrical Works Contract, was registered under the provisions of U.P Trade Tax Act and the Central Sales Tax Act. During the assessment year 2005-2006, the petitioner was awarded a civil works contract by Project Engineer, Jal Nigam for execution of civil works in Noida and Greater Noida. The petitioner applied for compounding under section 7-D of U.P Trade Tax Act, which was accepted. The Assessing Officer framed an assessment order under Rule 41(8) read with section 7-D, demanding a tax of 1% towards State Development Tax. The petitioner challenged this demand through a writ petition.

2. The High Court considered the arguments presented by the petitioner's counsel and the standing counsel for the department. Referring to the Division Bench decision in M/s Systematic Conscom Limited case, the Court held that the State Development Tax cannot be levied on contractors who have opted for compounding under section 7-D of the U.P Trade Tax Act. Relying on this precedent, the Court found merit in the petitioner's contention that the State Development Tax should not be imposed on them.

3. Consequently, the Court allowed the writ petition, modifying the assessment order and setting aside the portion related to the State Development Tax. The judgment clarified the legal position regarding the applicability of State Development Tax on contractors opting for compounding under the U.P Trade Tax Act, providing relief to the petitioner in this case.