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2021 (1) TMI 247 - HC - VAT and Sales TaxKarnataka VAT - Effect of Conversion of partnership firm into joint stock company - Carry forward deduction of unabsorbed contractor payments - the adjudicating authority as well as the first appellate authority allowed the claim but tribunal did not Whether the petitioner had substantiated with documentary evidence its claim for deduction of excess unabsorbed sub contractor payments? - HELD THAT:- It is evident that the petitioner had filed a copy of the agreement entered into with M/S B.E. Billimoria Ltd. for carrying on civil work of construction of apartments for and on behalf of the petitioner and had also filed copies of the purchase orders awarded to other registered sub contractors for carrying on the structure work, sanitary work etc. It has further been found by the first appellate authority that the petitioner had also filed certificates / declarations issued by sub contractors certifying that they have received consideration for executing the work contract and their details were also mentioned by the first appellate authority in para 8 of its order. On the basis of the aforesaid material, the adjudicating authority as well as the first appellate authority held that the petitioner had complied with the requirements of Section 15(5)(b) of the Act and therefore, it is entitled to benefit of the amounts paid to registered sub contractors to the extent of certificates / declarations filed - it is held that the finding recorded by the tribunal that the petitioner had not substantiated its claim for deduction of excess unabsorbed sub contractor payments before the adjudicating as well as first appellate authority is perverse and the aforesaid finding is therefore, set aside. Whether petitioner, which is a joint stock holding company can be permitted to carry forward unabsorbed sub contractor payments accumulated during its status as a partnership firm? - HELD THAT:- In the instant case, the erstwhile partnership firm has been converted to joint stock holding company by operation of law under Part-IX of the 1956 Act as ongoing concern and continues the business of the partnership firm, which is now being carried on by the company with all its assets movable and immovable, debts and liabilities in connection therewith. Therefore, there is no need of any explicit provision of law to state that all assets and liabilities of the erstwhile firm shall vest with the company. It is also pertinent to mention here that as per requirements contained in Section 28(2)(b) of the Act, the petitioner on transfer of business has already obtained a new registration under the Act. The tribunal erred in invoking Section 46(2-A) of the Act, which deals with adjustment of excess input tax, which is not the subject matter of the appeal. It ought to have been appreciated that in the instant case, there was no change in the ownership of the business and there was only change in the status of the business i.e., from partnership firm to joint stock company - the tribunal erred in law in holding that the petitioner which is a joint stock company cannot be permitted to carry forward unabsorbed sub contractor payment accumulated during its status as a partnership firm. The impugned order dated 18.12.2015 passed by the Karnataka Appellate Tribunal is quashed and it is held that the petitioner is entitled to the benefit of carrying forward of the payments made to sub contractors and is not liable to make payment of tax under Section 39(1) of the Act - Petition allowed.
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