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M/S SUNSHINE RUBBER INDUSTRIES versus COMMISSIONER TRADE TAX

High Court of Judicature at Allahabad

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M/S Sunshine Rubber Industries v. Commissioner Trade Tax - SALES/TRADE TAX REVISION No. 184 of 2005 [2007] RD-AH 3539 (1 March 2007)

 

This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).

HIGH COURT OF JUDICATURE OF ALLAHABAD

COURT NO.22

TRADE TAX REVISION NO.184 OF 2005

M/s Sunshine Rubber Industries, Kanpur Nagar.       ....Applicant

Versus

The Commissioner, Trade Tax, U.P.

Lucknow and another.   .Opp.party

***************

Hon'ble Rajes Kumar, J.

Present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Full Bench of the Tribunal dated 16.11.2004 rejecting the claim of exemption under the diversification scheme of Section 4-A of the Act.

Brief facts of the case are that the applicant is a partnership firm consisting of six partners. It established a new unit in the year 1990 for the manufacturing of micro rubber sheets. It appears that the land on which the unit was established, was purchased by five partners of the firm and they have contributed the land towards their fixed capital investment and on which construction was made. In the year 1998 it appears that the applicant had further made the investment towards the construction to the extent of Rs.1,04,630/- and towards plant and machinery at Rs.1,83,140/-. The aforesaid investments were made with the view to start the production of hawai chappal. The production of the hawai chappal was started on 01.09.1998. Thereafter, applicant applied for exemption under the diversification scheme of Section 4-A of the Act. While making the claim it was submitted that only half of the land and building were utilized in the manufacturing of micro rubber sheets and remaining half of the land and building were now being used in the manufacturing of hawai chappals. Thus, half of the value of the land and building at Rs.6,97,411/- and Rs.18,24,594/- were considered as additional investment for the establishment of the unit for the manufacturing of hawai chappals in addition to the further investments made towards construction and plant and machinery. He submitted that the total additional investment was to the extent of Rs.27,05,145/-. According to the applicant  in the impugned orders value of the land, building and machinery required for the manufacturing of micro rubber sheets were taken at Rs.15,49,293/-. The claim of the exemption under the diversification scheme was rejected by the Divisional Level Committee vide its order dated 31.12.2001. It was rejected on the ground that the additional fixed capital investment was less than 25% of the initial fixed capital investment, which was taken at Rs.15,49,293/-. Being aggrieved by the order of the Divisional Level Committee applicant filed appeal before the Tribunal. Tribunal vide order dated 21.03.2004 allowed the appeal and remanded back the matter to the Divisional Level Committee. Divisional Level Committee again vide order dated 29.03.2004 rejected the application on the same ground. Applicant again filed appeal before the Tribunal. Tribunal by the impugned order dismissed the appeal. Tribunal held that the value of the land and building can not be considered as the additional fixed capital investment. It has been held that the applicant all along had disclosed the value of the entire land and the construction in the balance sheet prior to the 1998.

Heard learned counsel for the parties.

Learned counsel for the applicant submitted that the Tribunal has not examined the case with reference to the definition of the "Fixed Capital Investment" under section 4-A (4) of the Act after its amendment by U.P. Act No.26 of 1998 w.e.f. 27.07.1998, which is applicable to the case of the applicant, inasmuch as the production was started from 01.09.1998. He submitted that as per the definition of the "Fixed Capital Investment" the value of only such land and building which is necessary for establishing or running the factory or workshop of the unit are to be considered and not the value of the entire land and building. He submitted that in the manufacturing of micro rubber sheets only half of the land and building had been used and remaining half of the land and building were used in the manufacturing of hawai chappals and, therefore, only half value of land and building should be taken for the determination of the fixed capital investment of the old unit and the value of the remaining half of the land and building should be considered as additional investment in the year 1998, as a result of which the unit was established for the manufacturing of hawai chappals. Learned Standing Counsel relied upon the order of the Tribunal.

I find some substance in the argument of learned counsel for the applicant. Perusal of the order of the Tribunal shows that the amended definition of the "Fixed Capital Investment" as provided in section 4-A (4) of the Act has not been considered by the Tribunal.

The amended definition of section 4-A (4) of the Act w.e.f. 27.07.1998 by U.P. Act No.26 of 1998 read as follows:

"Fixed capital investment" means value of land and building and such plants including captive power plant, machinery, equipment, apparatus, components, moulds, dyes, jigs and fixtures as have not been used in any other factory or workshop in India:

(a) for the purpose of determining value of land and building only the following shall be taken into account:

(i) value of only such portion of land and building as it necessary for the establishment or running of the factory or workshop of the unit :

(ii) expenses incurred in registration of land and building under the provisions of the Registration Act, 1908 and in development of land as development charges payable to any statutory body;

(iii) the value of land or building already owned and given by the proprietor, partner,, managing director, promoter director or holding company as his or its share in the capital in case the unit is established in such land or building;

(iv) the amount or proportionate amount paid  or payable as premium during the period for which exemption under section 4-A is granted on account of lease and the expenses incurred on registration of the lease deed under the Registration Act, 1908, in case the unit is established in land or building taken on lease;

(v) the value of land or building which is necessary for establishing or running the unit under some statutory obligation.

(b) ...............

(c) ...............

As per the amended definition of section 4-A (4) of the Act, only the portion of the land and building which are necessary for the establishment of the factory or workshop is to be taken and not the entire one. If applicant claims that only  some of the portion of the land and building had been used for running the factory of micro rubber sheets and not the entire one, it is on the applicant to prove that only some of the portion of the land and building had been used in the manufacturing of micro rubber sheets and not the entire land and building. Likewise it has to be established that for the manufacturing of hawai chappals w.e.f. 01.09.1998, half of the portion of the land and building, which were in existence even prior to 1998 were used in the manufacturing of hawai chappals. Divisional Level Committee as well as Tribunal has considered the fixed capital investment at Rs.15,49,293/- as a initial fixed capital investment. The details of the aforesaid amount shows that it only includes half of the value of the land. If Rs.15,49,293/- which has been taken as fixed capital investment of the old unit consist of only half of the value of the land then presumption appears to be that only half of the land was used in the manufacturing of micro rubber sheets and the remaining half of the land has been subsequently used in the manufacturing of  hawai chappals.

In my opinion, issue involved in the present case has not been properly examined by the Tribunal as well                                                                                                                                                       as by the Divisional Level Committee. Thus, the matter has to be examined with reference to the amended definition of "Fixed Capital Investment" as provided in section 4-A (4) of the Act. It is to be examined whether in the manufacturing of micro rubber sheets only half of the land and building had been used or the entire land and building. It is upon the applicant to prove its case in this regard. It is also to be seen whether in the manufacturing of hawai chappals value of the half of the land and building which are claimed to have not been used in the manufacturing of micro rubber sheets, have been actually used in the manufacturing of hawai chappals. On the determination of the aforesaid fact, value of the fixed capital investment should be determined with reference to the section 4-A (4) of the Act. Since the matter requires further enquiry, it would be appropriate that the matter may be remanded back to the Divisional Level Committee for fresh adjudication.

In the result, revision is allowed. Order of the Tribunal is set aside and the matter is remanded back to the Divisional Level Committee to adjudicate the issue afresh in the light of the observations made above. Applicant may present the certified copy of this order before the Convenor of the Divisional Level Committee within four weeks and the Divisional Level Committee thereafter decide the issue after giving opportunity of hearing to the applicant, expeditiously preferably within a period of three months thereafter.

Dt.01.03.2007

R./


Copyright

Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites

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