High Court partly allowed revision. Court held explanation VII applies to actual returns but not estimated turnover to avoid double taxation. Directs AO to adopt estimated turnover without discount addition.
Sustained estimation at 3.12% gross profit and directed Assessing Officer to adopt taxable turnover at Rs.1,18,36,786/- without adding discount.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
&
THE HONOURABLE MR. JUSTICE ASHOK MENON
FRIDAY, THE 04TH DAY OF JANUARY 2019 / 14TH POUSHA, 1940
O.T.(Rev.) No.106 of 2018
AGAINST THE ORDER IN TA(VAT) NO.515/2014 OF THE KERALA VALUE ADDED TAX/ AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE DATED 23-07-2018
REVISION PETITIONER/APPELLANT:
P.R.ENTERPRISES, 20/265A 20, KALLAI ROAD, KOZHIKODE.
BY ADVS. SRI.C.S.ARUN SHANKAR SMT.REVATHY P.NAIR SRI.S.SHYAM KUMAR SRI.T.G.MADHAVANUNNI
RESPONDENT/RESPONDENT:
STATE OF KERALA REPRESENTED BY DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, KOZHIKODE.
SR. GOVERNMENT PLEADER SRI.V.K. SHAMSUDHEEN
THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 04.01.2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:
O.T.(Rev.) No.106 of 2018
2
JUDGMENT
K. Vinod Chandran, J.
The question raised in the above appeal is re-
framed as follows:
“ Whether the Tribunal was correct in having applied Explanation VII to Section 2(lii) and added on the discount for the purpose of computing the turnover?”
2. An ancillary question arises, which is framed
as follows:
“Whether the lower authorities were correct in having estimated the sales turnover at 3.12% gross profit and added on the discount for the purpose of computing the taxable turnover?
3. The assessee had filed its return declaring
its purchase price, as also the taxable turnover. The purchase price did not include duty wages and loading and unloading charges respectively of Rs.37,370/- and Rs.2,31,176/-. The Assessing Officer found that these are direct expenses forming part of
production/purchase. The purchase price of the
O.T.(Rev.) No.106 of 2018 3
assessee hence stood enhanced to Rs.1,14,88,348/-. To this, an addition was made with Gross Profit [G.P.] @ 3.13%. The taxable turnover of sale so estimated came to Rs.1,18,46,786/-. The Assessing Officer also found that the assessee had received a discount of Rs.4,88,354/-, which have to be added back under Explanation VII to Section 2(lii) of the Act. The Assessing Officer having found the returned taxable turnover to be Rs.1,13,32,792/-, it was lower than the sales turnover and hence applied Explanation VII to Section 2(lii) and computed the total turnover as Rs.1,18,46,786/plus
Rs.4,88,354/-.
4. As far as the Explanation VII to Section 2(lii) of the Act, the issue stands covered by a
judgment of a Division Bench of this Court in State of Kerala v. Syed Muhammed [2016 (4) KLY 462] .
Therein also the assessee having suffered loss received some amounts from the suppliers for the
O.T.(Rev.) No.106 of 2018 4
purpose of recouping the loss suffered by it. Based on Explanation VII to Section 2(1ii) the amount transferred to recoup the loss was included in the turnover. The learned Counsel for the assessee then refers to a decision of the Hon'ble Supreme Court
reported in M/s.Southern Motors v. State of Karnataka [2017 (98) VST (207) SC] , wherein under the Karnataka enactment, it is found that the discount by the supplier cannot be added to the sales turnover of the purchaser. Yet another Division Bench of this Court in C. Mohanan v. State of Kerala [OT (Rev.) No.142 of 2013] by judgment
dated 12.04.2017 found that there was no provision similar to Explanation VII of Section 2(lii) of the KVAT Act, in the Karnataka enactment. The said decision was found to be inapplicable insofar as the provisions of KVAT Act.
5. The learned Counsel for the assessee would also refer to another three Judge Bench decision of
O.T.(Rev.) No.106 of 2018 5
the Hon’ble Supreme Court reported in Maya Appliances (P) Ltd. V. Addl. Commissioner of
Commercial Taxes [(2018) 2 SCC 756] . We notice that the said decision also was on the Karnataka Value Added Taxes Act, which did not contain the provision
in the Kerala VAT enactment. We hence answer the first question in favour of the Revenue and against the assessee.
6. Despite our answering the question in favour of the Revenue, in so far as the addition made on the discount, we framed an additional question of law, since we notice that there has been double taxation effected by application of Explanation VII to Section 2(lii). The actual purchase price by adding on the duty wages and loading and unloading charges was found to be Rs.1,14,88,348/-. An estimate was made of the total taxable turnover @ 3.12% G.P. and the figure arrived at was Rs.1,18,46,786/-. Hence the sale price was in excess
O.T.(Rev.) No.106 of 2018
6
of the purchase price. In that context, there was no requirement for an addition of the discount applying Explanation VII to Section 2(lii). Either the Assessing Officer could have added on the discount to the returned turnover or taxed the estimated
turnover adding G.P. When the sales turnover is estimated after computing the G.P then necessarily the entire turnover is taxed. We also notice that even taking into account the actual purchase price as found by the Assessing Officer, if the discount is added, the total taxable turnover will be almost as estimated with G.P. of 3.12%. There cannot be an exercise made of applying gross profit and then addition of the discount amounts; in which event there would be double taxation on the estimated component. We hence sustain the estimation made with G.P. @3.12% and direct the Assessing Officer to adopt the taxable turnover at Rs.1,18,36,786/- after including the estimation with respect to the other
O.T.(Rev.) No.106 of 2018
7
suppression. In the context of our agreeing with the estimation @3.12% G.P., we direct the Assessing Officer not to make any addition with respect to the discount, since it is already reflected in the estimated turnover. We hence answer the second question in favour of the assessee and against the Revenue.
We hence partly allowed the above O.T. Revision. Parties to suffer their respective costs.
Sd/-
K.VINOD CHANDRAN JUDGE
Sd/-
ASHOK MENON JUDGE
sp/10/01/19
//True Copy//
P.A. To Judge
O.T.(Rev.) No.106 of 2018
8
APPENDIX
PETITIONER'S EXHIBITS:
ANNEXURE A THE TRUE COPY OF THE ORDER DATED 28.03.2012 OF THE COMMERCIAL TAX OFFICER, 3RD CIRCLE, COMMERCIAL TAXES, KOZHIKODE FOR THE YEAR 2009-10.
ANNEXURE B THE TRUE COPY OF THE ORDER DATED 17.05.2013 PASSED BY THE DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAXES, KOZHIKODE IN KVAT APPEAL NO.431A/2012. ANNEXURE C THE TRUE COPY OF THE ORDER DATED 23.07.2018 PASSED BY THE KERALA VALUE ADDED TAX/AGRL. INCOME TAX AND SALES TAX APPELLATE TRIBUNAL ADDL. BENCH, KOZHIKODE IN TA (VAT) NO.515/ 2014.
ANNEXURE D1 THE TRUE COPY OF THE CERTIFICATE/ DECLARATION DATED 31.03.2010 ISSUED BY THE SELLER CERTIFYING THAT THE TAX ON THE AMOUNT OF DISCOUNT HAD BEEN PAID BY THEM. ANNEXURE D2 THE TRUE COPY OF THE COVERING LETTER AND CHEQUE EVIDENCING PAYMENT TOWARDS THE DEMAND.
RESPONDENT'S EXHIBITS:- NIL
//TRUE COPY//
P.A. TO JUDGE
3 issues framed by the court
Whether the Tribunal was correct in applying Explanation VII to Section 2(lii) to add the discount for computing turnover where actual turnover was estimated?
Whether adding discount under Explanation VII to Section 2(lii) results in double taxation when turnover is estimated based on gross profit?
Whether the Assessing Officer should include discount calculation in estimated taxable turnover given double taxation avoidance?
Colour shows how this judgement treated each authority
State of Kerala v. Syed MuhammedReferred¶33
_State of Kerala v. Syed Muhammed [2016 (4) KLY 462]_
M/s. Southern Motors v. State of KarnatakaReferred¶36
_M/s. Southern Motors v. State of Karnataka [2017 (98) VST (207) SC]_
C. Mohanan v. State of KeralaDistinguished¶37
_C. Mohanan v. State of Kerala [OT (Rev.) No.142 of 2013]_
Maya Appliances v. Addl. Commissioner of Commercial TaxesDistinguished¶41
_Maya Appliances (P) Ltd. V. Addl. Commissioner of Commercial Taxes [(2018) 2 SCC 756]_ · Who else cites this
1 provisions across 1 enactments
P.R. Enterprises
State of Kerala
Vinod Chandran
Ashok Menon
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
