2015 (1) TMI 1189 - HC - VAT and Sales Tax

Entitlement for exemption for 5 years u/s 4A(1) of the U.P. Trade Tax Act, 1948 Exemption from the date of registration of the sale deed - Whether the Tribunal was wrong in ignoring the date of ownership accruing from the date of entry into possession with effect from 20.10.1986 i.e. the date of registration of the agreement to sale and when the petitioner came into possession of the property in question for the purposes of determining the ownership as being the first date for grant of exemption - Held that - The word owned has been interpreted in Mysore Mineral Ltd. Vs. Commissioner of Income Tax 1999 (9) TMI 1 - SUPREME Court wherein it has been held that the term owned as occurring in section 32(1) of the Income-tax Act, 1961, must be assigned a wider meaning - anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. - the revisionist which is a private limited Company engaged in the manufacture and sale of Diesel, Engines, Generating Sets, Alternators etc. had purchased the land and building for establishing a new unit through registered agreement to sale - Vacant possession of the land and building had been given to the revisionist on 20.10.1986 on the basis of the agreement of sale dated 20.10.1986 - the revisionist under the registered agreement to sale had entered into possession of the land and building and the agreement to sale was registered on 20.10.1986, thus, the revisionist would be entitled for the grant of exemption from 20.10.1986 to 22.12.1991 Decided in favour of revisionist assessee.

Summary

Issues Involved:
1. Entitlement to tax exemption under Section 4-A (1) of the U.P. Trade Tax Act, 1948.
2. Determination of the period of exemption based on ownership and possession.
3. Interpretation of the term "owned" under Section 4-A (5) of the Act.

Issue-wise Detailed Analysis:

1. Entitlement to tax exemption under Section 4-A (1) of the U.P. Trade Tax Act, 1948:
The revisionist, engaged in manufacturing Diesel Engines, Generating-Sets, and Alternators, established a new unit and sought exemption from trade tax for five years under Section 4-A (1) of the U.P. Trade Tax Act, 1948. The Tribunal partially allowed the appeal, granting exemption from 14.8.1987 to 22.12.1991, based on the date of registration of the sale deed.

2. Determination of the period of exemption based on ownership and possession:
The revisionist argued that the period of exemption should commence from 20.10.1986, the date of registration of the agreement to sale, and the date they took possession of the property. The Tribunal erroneously directed the Divisional Level Committee to grant exemption from 14.8.1987, the date of registration of the sale deed. The revisionist contended that they were entitled to exemption from the date of possession, which was earlier than the registration of the sale deed.

3. Interpretation of the term "owned" under Section 4-A (5) of the Act:
The term "owned" was crucial in determining the start date for the exemption period. The Supreme Court's interpretation in Mysore Mineral Ltd. Vs. Commissioner of Income Tax (1999) 239 ITR 775 (SC) was pivotal. The Court held that "ownership" includes possession and dominion over the property, even without a formal deed of title. This broader interpretation meant that the revisionist, having taken possession of the property on 20.10.1986, should be considered the owner from that date for the purposes of tax exemption.

The Tribunal relied on the Supreme Court judgment in Divisional Level Committee and another Vs. Harswarup Drum Udyog 1999 U.P.T.C. 217 (SC), which did not adequately address the possession aspect. The revisionist's case was more aligned with the facts in Mysore Mineral Ltd., where possession and part payment conferred ownership rights sufficient for tax purposes.

Conclusion:
The High Court concluded that the revisionist was entitled to tax exemption from 20.10.1986 to 22.12.1991, based on the broader interpretation of "ownership" that includes possession. The Tribunal's reliance on Harswarup Drum Udyog was deemed incorrect, and the order was set aside. The revision was allowed, granting the revisionist the requested exemption period.