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2015 (10) TMI 626 - KERLA HIGH COURT

2015 (10) TMI 626 - KERLA HIGH COURT - TMI - Payment of tax on compounding basis - Section 5A - petitioner failed to comply with the monthly payment of the instalments fixed under the compounding scheme - Held that:- On a perusal of Section 5A of the Kerala Tax on Luxuries Act, it is evident that, the scheme of compounding that is envisaged therein is a code in itself. There are provisions which deal with the manner in which the compounding application is to be filed by the assessee and processe .....

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ed against the petitioner for recovery of the defaulted instalments under the scheme of compounding under Section 5A of the Act, their action in completing a regular assessment under Section 6 of the Kerala Tax on Luxuries Act is clearly illegal - The amounts, if any, remitted by the petitioners pursuant to the orders that have been quashed in these writ petitions shall be adjusted towards any liability flowing from the default of the petitioners under the scheme of compounding under Section 5A .....

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m W.P.(C).No.25086 of 2015. 2. The petitioner is an assessee under the Kerala Tax on Luxuries Act, 1976 and is engaged in the business of renting out a house boat with two Air Conditioned bedrooms in the name and style of "Lake Surya". For the purposes of assessment under the Kerala Tax on Luxuries Act, the petitioner had opted for the payment of tax on compounding basis as provided under Section 5A of the Act. The option was exercised in respect of the assessment years 2013-2014 and 2 .....

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the monthly payment of the instalments fixed under the compounding scheme. The 1st respondent, however, instead of cancelling the application for compounding, proceeded to issue a notice to the petitioner under Section 6 (2) and (3) of the Kerala Tax on Luxuries Act proposing to complete an assessment on best judgment basis as contemplated under the said Section. Although the petitioner preferred a detailed reply to the said notice, the 1st respondent proceeded to pass Ext.P3 order of assessment .....

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of ₹ 2,420/- each. In the said writ petition also Exts.P3 assessment order as well as Ext.P4 demand notice and Ext.P5 revenue recovery notice are impugned. 3. The contention of the petitioner in both the writ petitions is essentially that, insofar as he had opted for payment of tax on compounded basis under Section 5A of the Act, even if there is a default in payment of the instalments, the option available to the respondents was only to proceed with the revenue recovery steps for recovery .....

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ala Tax on Luxuries Act would clearly apply to cover situations were a person, who had initially opted for payment of tax on compounded basis under Section 5A of the Act, had since defaulted in complying with the provisions governing payment of tax. It is his specific contention that, when an assessee opts for the method of payment of tax on compounded basis and defaults in payment of tax under the said scheme, then the assessee would forfeit his right to continue under the compounded scheme and .....

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. The provisions of Section 5A also deal with the determination by the assessing authority of the monthly instalment of tax that is required to be paid by an assessee under the scheme. Section 5 A (6) which is relevant for the purposes of the instant case, states that, if the tax determined is not paid as specified in Sub Section 5, it shall be recovered along with penalty in accordance with the provisions of the Act. A plain reading of the said provision therefore makes it unambiguously clear t .....

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e Scheme of compounding, under Section 5A of the Kerala Tax on Luxuries Act. The issue that arises for consideration, however, is whether the revenue authorities can, while the option exercised by the assessee for payment of tax on compounded basis under Section 5A subsists, resort to a simultaneous assessment on regular basis as contemplated under Section 6 of the Kerala Tax on Luxuries Act. In this connection, it is relevant to note the decisions of the Supreme Court in Bhima Jewellery v. Assi .....

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