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2016 (7) TMI 1192 - MADRAS HIGH COURT

2016 (7) TMI 1192 - MADRAS HIGH COURT - TMI - Reversal of Input Tax Credit (ITC) on account of cross verification of Annexure I of the buyer with that of Annexure - II of the seller - levy of tax on intellectual property purchased and used - Held that:- the respondent was required to examine that the said issue, peruse the business transfer agreement and if necessary call for other records to find out as to whether it was the case of transfer of business as a whole. However, on a perusal of the .....

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has not been either accepted or rejected. - Therefore, the finding rendered in D.No.2 of the impugned order also calls for interference and remitted for fresh consideration. - Order set aside - Matter remanded back. - W.P.No.14242 of 2016, WMP.Nos.12442 and 16588 of 2016 - Dated:- 6-6-2016 - T. S. Sivagnanam , J. For the Petitioner: Mr.N.SriPrakash & N.Prasad For the Respondent : Mr.Manokaran Sundaram ORDER The petitioner, a registered dealer under the provisions of the Tamil Nadu Value .....

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regarding levy of tax on intellectual property purchased and used. The above two issues have been dealt with by the respondent in the impugned order as D.No.2 and D.No.3 of the order. With regard to the other issues, it is left open to the petitioner to workout their remedies under the Act. 3. The petitioner was issued a show cause notice dated 31.03.2015 which emanated out of an inspection of the place of business of the petitioner by the Enforcement Officials on 20.01.2015. It was stated in th .....

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ellectual property being used are nothing but intangible goods liable to tax at 4%. Further, he stated that in terms of Section 12 of the Act, every registered dealer who in the course of business purchases from a registered dealer or any other person, any goods in circumstances in which no tax is payable by that registered dealer on the sale price of such goods under the Act and either consumes or uses such goods in or for the manufacture of other goods for sale or otherwise is liable to pay ta .....

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4.With regard to issue No.2 regarding the reversal of ITC on account of cross verification of Annexure I of the seller, the authority stated that the bills for the turnover of ₹ 25,65,486/- has not been produced for which the tax implication is ₹ 10,300/- and proposed reversal of the amount of ₹ 94,03,130/-. With regard to issue No.3, i.e., D.No.3 in the impugned order, the petitioner in their reply dated 25.08.2015 stated that they entered into business transfer agreement and .....

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on, the petitioner referred to the decisions in the case of (i) Deputy Commissioner (CT) Vs. K.Behanan Thomas, 39 STC 325 (Mad); (ii) Monsanto Chemicals of India Vs. The State of Tamil Nadu, 51 STC 278; (iii) Eicher Motor Limited TC (R) 49/13 dated 06.11.2013. Further, it was stated that for the purpose of valuation, a certain value is indicated in the books as value of 'goodwill' and 'brand'. However, the contract remains one for transfer of business as a whole. The decision in .....

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ssuming Section 12 stood applicable, goodwill or brand cannot be stated to be consumed or used in manufacture and they are not inputs for manufacturing activity. Reference was also made to the decision of the Hon'ble Supreme Court in Rustom Cavasjee Cooper V. Union of India, AIR 1970 SC 564 for their contention that a business is not goods. With the above submission, the petitioner requested to drop further proceedings, pursuant to the show cause notice. 5. So far as the issue No.2 is concer .....

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all of a sudden is a herculean task and they have requested the authority to grant 15 days time to produce those records. In the light of the stand taken by the respondent with regard to issue No.3 relating to the levy of tax on intellectual property, the authority was bound to consider as to whether the transaction was one of transfer of the business as of whole at this being a specific case of the petitioner. The decision in the case of Deputy Commissioner CT, Coimbatore V. K.Behanan Thomas, .....

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usiness so as to be taxable under the Act. This decision was followed by the Division Bench in the case of Eicher Motors Limited, Thiruvotriyur High Road, Chennai 600 019 V. The State of Tamil Nadu, Rep. By the Assistant Commissioner (CT) Zone VII, Chennai, Tax Case (Revision) No.49 of 2013 dated 06.11.2013, wherein, in paragraph 15 & 16, it was held as follows: 15. In contrast to this is the decision reported in 39 STC 325 (Deputy Commissioner CT, Coimbatore Vs. K.Behanan Thomas), we find t .....

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erent from the sale of the business as a whole as running concern; the sale of the business, lock, stock and barrel, was not incidental or ancillary to the carrying on of a business so as to be taxable under the Act. Thus, this Court held that the transaction in question would not fall within the scope of the Act at all, consequently, the sale proceeds would not form part of the turnover as defined under the Act. This Court further pointed out that when there was a transfer of the business as a .....

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whole, the assessee could not claim the benefit of exemption under the provisions of the Act. 16. The decision reported in 39 STC 325 in the case of Deputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas once again came up for consideration in the decision reported in 51 STC 278 in the case of Monsanto Chemicals of India Ltd., (P) Limited Vs. The State of Tamil Nadu, wherein, this Court pointed out that where under the agreement, the assessee sold to another company certain lines of business .....

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osure of a line of business could not be incidental or ancillary to its carrying on or on the alternative basis of application of Rule 6(d) of Tamil Nadu General Sales Tax Rules, 1959. Thus, on facts once again, this Court held that the assessee was eligible for exemption in respect of the turnover. 7. Therefore, the respondent was required to examine that the said issue, peruse the business transfer agreement and if necessary call for other records to find out as to whether it was the case of t .....

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