2015 (3) TMI 478 - HC - VAT and Sales Tax

Benefit of input tax rebate - whether Xerox machines, office stationary, air conditioners, building equipments, security system for building qualify for the benefit of input tax rebate. - Held that - In view of clause (b) of sub-Section (6) of Section 2 of the KVAT Act, any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture adventure or concerned falls within the definition of 'business' and as such the machinery is used in the course of business the assessee is entitled to the input tax rebate. The appellate Tribunal has not looked into this statutory provision before arriving by such conclusion and therefore, it is not sustainable. Similarly, the findings of the Tribunal that there is no requirement that a particular temperature alone is essential for software development, the air conditioner makes the atmosphere good and increases the comforts, but they are not directly connected with the software activity, are concerned, in view of the reasons set out above, while considering the meaning of the word 'business', it is not necessary that there should be a direct nexus between the machinery and the activity that is carried on. Any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture adventure or concern, is sufficient to bring it within the word 'business' and therefore, when Air conditioner is used by the assessee in the course of his business, it falls within the definition of 'capital goods'. In view of Section 12 of the Act, the assessee is entitled to benefit of input tax rebate. For the very same reasons, the security systems for building where business is carried on is also eligible for tax rebate. In that view of the matter, the order of the Tribunal to that extent requires to be interfered with and accordingly, the said findings are set aside. - assessee is entitled to input tax rebate in respect of work stations as they do not fall under the definition of 'wood furniture'. - assessee is entitled to the benefit of input tax rebate on xerox machines, air conditioners and security systems for building - Decided in favour of assessee.

Summary

Issues:
Challenging denial of input tax rebate on various goods for export business.

Analysis:
The case involved revision petitions challenging a Tribunal order denying input tax rebate on certain goods for export business. The petitioner, a software development business, imported duty-free goods for software development and export, claiming input tax rebate on purchases within the State for export business. The Deputy Commissioner partially allowed the rebate, leading to further revisions and appeals. The Tribunal allowed rebate on work stations but denied it on Xerox machines, office stationary, air conditioners, building materials, and security systems. The main contention was whether these goods qualified as 'capital goods' for input tax rebate.

The petitioner argued that despite tax restrictions, they were entitled to rebate on capital goods used for export business. The revenue contended that the goods in question did not meet the definition of capital goods under the Act. Section 12 of the Act allows input tax deduction for capital goods used in the business of exporting goods. The definition of capital goods includes plants, machinery, vehicles, etc., used in business other than for sale. A previous case clarified that deduction is allowed for capital goods used in business activities.

The Court analyzed whether the goods in question qualified as capital goods. Stationary and building materials were deemed ineligible, but Xerox machines, air conditioners, and security systems were considered machinery used in business. A judgment from the Andhra Pradesh High Court supported the classification of Xerox machines as machinery. The Court emphasized that for goods to be considered capital goods, they must be used in the course of business, as defined under the Act. The Tribunal's decision was overturned for not considering this statutory provision.

Regarding air conditioners, the Court noted their role in maintaining a suitable environment for business activities, making them eligible for tax rebate as capital goods. Similarly, security systems for buildings were deemed essential for business operations and thus qualified for rebate. The Tribunal's findings were set aside in these instances. The Court also upheld the Tribunal's decision on work stations, as they did not fall under the definition of 'wood furniture', dismissing the State's challenge.

In conclusion, the revision petitions were partly allowed, granting the petitioner input tax rebate on Xerox machines, air conditioners, and security systems for buildings, while maintaining the Tribunal's order on other aspects.