1995 (2) TMI 375 - HC - VAT and Sales Tax

Issues Involved:

1. Whether the Sales Tax Officer was justified in making a single assessment for a period of 21 months under section 33A of the Bombay Sales Tax Act, 1959.
2. Whether a dealer not liable to turnover tax under section 9 of the Act for a 12-month period can be made liable by extending the assessment period to 21 months.

Detailed Analysis:

Issue 1: Justification of Single Assessment for 21 Months

The primary issue was whether the Sales Tax Officer was correct in assessing the tax for a period of 21 months (from July 1, 1987, to March 31, 1989) by invoking section 33A of the Bombay Sales Tax Act, 1959. The assessee had traditionally maintained an accounting year from July 1 to June 30. For the year 1987-88, the accounts were closed on June 30, 1988. However, due to amendments in the Income-tax Act, 1961, the assessee closed the accounts for the subsequent year on March 31, 1989, resulting in a 9-month period instead of the usual 12 months.

The court noted that section 33 of the Act mandates separate assessments for each year. The definition of "year" includes both the financial year and the dealer's accounting year. Section 33A, introduced to address transitional accounting years due to changes in the Income-tax Act, allows for a single assessment for a transitional year longer than the usual accounting year. However, this provision was intended for situations where the accounting year exceeds 12 months, which was not the case here. The assessee had a regular 12-month accounting year until June 30, 1988, and a transitional 9-month period thereafter.

The court concluded that the Sales Tax Officer should have made two separate assessments: one for the 12 months ending June 30, 1988, and another for the 9 months ending March 31, 1989, under section 33 and its proviso. The officer's reliance on section 33A to make a single assessment for 21 months was incorrect.

Issue 2: Liability to Turnover Tax by Extending Assessment Period

The second issue was whether extending the assessment period to 21 months could make a dealer liable for turnover tax under section 9 of the Act, even if the turnover for a 12-month period was below the threshold of Rs. 12 lakhs. The court emphasized that section 33A is a procedural provision and cannot alter the substantive liability under the charging section (section 3) or the turnover tax provision (section 9).

Section 9 imposes turnover tax only if the turnover exceeds Rs. 12 lakhs in any year. The term "year" in this context refers to the dealer's accounting year or the financial year, as defined in section 2(37) of the Act, and not a transitional year. The court highlighted that section 33A(3) explicitly excludes the application of the transitional year for the purposes of section 3 and where the context requires otherwise, which includes section 9.

Therefore, the court held that the assessee could not be made liable for turnover tax by extending the assessment period to 21 months. The correct approach was to assess the tax for the 12-month period separately from the 9-month period, ensuring that the turnover did not exceed the threshold in any single year.

Conclusion:

The court concluded that the Tribunal was not justified in holding that the assessee had adopted a transitional accounting year liable to single assessment under section 33A for 21 months. The question referred was answered in the negative, in favor of the assessee, with no order as to costs.

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