2013 (3) TMI 582 - HC - VAT and Sales Tax

Deferment of payment of tax and remission of tax for sick industrial units - Calculation of gross value of fixed capital assets - whether the gross value of the fixed capital assets has to be ascertained on the basis of the actual investment made by the company and not the depreciated value? Held that - Gross value of the fixed capital assets as stood on the date of rehabilitation/revival of a sick unit and the cost of new plant and machinery purchased and installed have to be taken into account. Therefore with respect to a new plant and machinery purchased and installed it is not difficult to find out the extent of investment because actual price paid can be taken into account. But with regard to the existing machinery or fixed capital assets the value which can be taken into account is the value which stood on the date of rehabilitation or revival of the sick unit. We are as such of the opinion that no interference with the order of the Tribunal is called for. The writ petition is as such dismissed.

Summary

Issues Involved: Interpretation of section 43 of the West Bengal Sales Tax Act, 1994 for valuation of fixed capital assets for remission benefits.

Detailed Analysis:

1. Background and Facts:
The case involves a company that ceased to be a sick industrial company in 1996 after enjoying deferment of tax payments. The company applied for remission benefits under the West Bengal Sales Tax Act, 1994, which was granted for a period starting from July 1995. Disputes arose regarding the calculation of the gross value of fixed capital assets for remission benefits.

2. Interpretation of Section 43 of the Act:
The primary contention was whether the depreciated value or the actual investment value of fixed capital assets should be considered for valuation under section 43 of the Act. The petitioner argued that the Legislature intended to consider the actual investment made by the company, not the depreciated value. However, the State contended that the method of valuation was clearly laid down in the Explanation to section 43, leaving no room for liberal interpretation.

3. Judicial Interpretation:
The Court analyzed the provisions of section 43 in detail, emphasizing that the gross value of fixed capital assets includes the value of existing assets as well as new plant and machinery purchased after rehabilitation. The Court rejected the petitioner's argument that only the original purchase value should be considered, highlighting that the intention of the Legislature was to base benefits on the capital outlay at the time of rehabilitation, i.e., the depreciated value.

4. Precedents and Legal Arguments:
The petitioner relied on judgments emphasizing the cost price of assets without considering depreciation. However, the Court distinguished those cases, stating that the specific language of section 43 required valuation based on the assets' depreciated value at the time of rehabilitation. The Court also noted that the petitioner initially claimed benefits based on the depreciated value disclosed in its balance sheet.

5. Conclusion and Judgment:
After considering the arguments and legislative intent, the Court upheld the Tribunal's decision, dismissing the writ petition. The Court concluded that no interference was warranted as the valuation should be based on the depreciated value of fixed capital assets as per the statutory provisions. Each party was ordered to bear its own costs, and the judgment was made available upon request.

In summary, the Court's decision in this case clarified the valuation method for fixed capital assets under the West Bengal Sales Tax Act, emphasizing the importance of considering the depreciated value at the time of rehabilitation for determining remission benefits, as prescribed by section 43 of the Act.