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2016 (10) TMI 786 - GUJARAT HIGH COURT

2016 (10) TMI 786 - GUJARAT HIGH COURT - TMI - Classification of goods - Out Board Marine Engine - classified under residuary entry and taxed at 12.5% or would fall under entry-42A as agricultural inputs and taxed at 4% - Whether on the facts and circumstances of the case, the Tribunal has rightly held that, the goods 'Out Board Marine Engine' commonly known as “Oil Engines” falls U/e No.42A of Schedule II of the Gujarat Value Added Tax Act,2003? - The assessee deals in Out Board Marine Engi .....

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on. 11. A similar issue came up before the Supreme Court in case of Commissioner of Income-tax,West Bengal, Calcutta V/s. Benoy Kumar Sahas Roy [1957 (5) TMI 6 - SUPREME Court] where it was held that Nevertheless there is present all throughout the basic idea that there must be at the bottom of it cultivation of land in the sense of tilling of the land, sowing of the seeds, planting, and similar work done on the land itself. This basic conception is the essential sine qua non of any operation pe .....

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tructure or building containing one or more units with infrastructure such as an administrative section or storage or a laboratory, a building machinery etc. taken together that are used in the unit of industrial production are also categorized as plant. The fishing boat would certainly not fall within this description. - The entry-58A refers to plant and machinery and not plant or machinery. Accepting the contention of the assessee that the entry would include either plant or machinery woul .....

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ery (other than second hand plant and machinery) meant for use in manufacture of taxable goods and accounted as capital assets in the books of accounts.” He would submit that if same logic is applied here also, capital goods would include only machinery which part of a plant and not otherwise. We do not think so. This definition of term capital gods is worded as to mean plant and machinery used for manufacture of taxable goods. Word 'and' in this definition seems to have been used to convey the .....

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MR. A.J. SHASTRI, JJ. FOR THE APPELLANT : MR HARDIK VORA, AGP FOR THE OPPONET : MR N C SHUKLA, ADVOCATE, MR TUSHAR P HEMANI, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These appeals are filed by the Government of Gujarat. They have been admitted for consideration of following substantial question of law : Whether on the facts and circumstances of the case, the Tribunal has rightly held that, the goods 'Out Board Marine Engine' commonly known as Oil Engines falls U .....

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the assessment in case of the respondent and levied VAT @ 12.5% treating the goods under the residuary entry. In the process, the Assessing Officer relied on a determination order dated 16.4.2007 passed by the Joint Commissioner in case of one M/s.Gujarat Matsyaudhyog Kendriya Sahakari Sansthan Ltd. 3. Against the said order of assessment dated 28.3.2011, the assessee filed appeal before the Deputy Commissioner of Commercial Tax, who dismissed said appeal by an order dated 28.11.2011. Upon which .....

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under entry-58A pertaining to plant and machinery and therefore also, exigible to tax at 4%. The goods would therefore, not be covered under the residuary entry. 4. The Tribunal disposed of the appeal of the assessee vide impugned judgment dated 29.7.2012. The three Judge bench of the Tribunal had difference of opinion. Two learned members were of the opinion that the appeal should be allowed. It was held that the engine would be covered within the description Oil Engine including Diesel Oil En .....

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of the opinion that Out Board Marine Engine cannot be categorized as an agricultural input since it is designed for being fitted on fishing boats and the activity of fishery cannot be classified as agricultural activity. He also discarded the assessee's alternative contention that Out Board Marine Engine would fall within the description plant and machinery. He gave a common understanding interpretation to the said term 'Plant and Machinery' to come to the conclusion that the fishin .....

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cially designed engine for such purpose. Entry-42A Schedule II pertains to industrial inputs or agricultural inputs as may be specified by the State Government by notification in the official gazette and carried at the relevant time the tax liability of 4%. Thus, essentially those agricultural inputs which may be notified by the State Government in official gazette, would be covered under entry- 42A. At the relevant time, the notification dated 29.3.2006 held the field and notified the goods of .....

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rolley. 7. In essence, entry-42A pertained to agricultural inputs. However, for being included in entry-42A, such agricultural inputs had to be those which may be specified by the State Government by a notification published in the official gazette. Essentially therefore, for a product to fall within entry-42A, it had to be an agricultural input. The question such agricultural input being notified in official gazette by the Government for such purpose would come later. The entry 'Oil Engine .....

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peruse the later entries in the said Schedule which as noted above, referred to Drip Irrigation equipments, Sprinklers, Micro Irrigation System Equipments and Tractor's Trolley. All these are unequivocally and exclusively agricultural inputs. May be a product like sprinkler may have other additional or side uses. Nevertheless, the equipments such as Drip Irrigation equipments, Sprinklers, Micro Irrigation System equipments and Tractor's Trolley are predominantly meant for agricultural op .....

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f crops, grass or garden produce, and grazing; but does not include dairy farming, poultry farming, stock breeding or the mere cutting of wood or grass or gathering of fruits.' 8.1 The term 'agriculturist' has been defined under Section 2(2) of the VAT Act as under : 'agriculturist' means a person who cultivates land personally for the purpose of agriculture.' 8.2 Section 2(9) of the VAT Act defines the terms 'to cultivate' and 'to cultivate personally' as .....

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'agriculture' with all its grammatical variations and cognate expressions would include floriculture, horticulture, the raising of crops, grass or garden produce, and grazing. By definition the activities of dairy farming, poultry farming, stock breeding or the mere cutting of wood or grass or gathering of fruits are excluded from such expression. The term 'agriculturist' is defined as to mean a person who cultivates land personally for the purpose of agriculture. The term ' .....

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d the related terms have reference to cultivation of land. It would include floriculture, horticulture, the raising of crops, grass or garden produce, and grazing. All these activities would be in connection with the soil. By no stretch of imagination, activity of fishing would satisfy this definition. 11. A similar issue came up before the Supreme Court in case of Commissioner of Income-tax,West Bengal, Calcutta V/s. Benoy Kumar Sahas Roy, reported in AIR 1957 SC 768 in the context of the India .....

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all throughout the basic idea that there must be at the bottom of it cultivation of land in the sense of tilling of the land, sowing of the seeds, planting, and similar work done on the land itself. This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operation. If the basic operations are there, the rest of the operations found themselves upon the same. But if these basic operations are wanting the subsequent operations do not acqu .....

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satisfied the requirement of expression 'Plant and Machinery'. The term 'plant' has been explained in the Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edition, 2009 as under : PLANT (Production facility, Workshop means a relatively self-contained area, structure or building containing one or more units with auxiliary and associated infrastructure, such as (i) small administrative section; (ii) storage/handling areas for feedstock and products; (iii) effluent/waste handling/tre .....

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eration or process'. Fixtures, implements, machinery used in industrial process (S.2(b)(xii), Coal Mines Provident Fund and Miscellaneous Provisions Act (46 of 1948)]; a young tree, vine or shrub lately planted or suitable for planting (S.14(v), Central Sales Tax Act (74 of 1956)] The building, machinery, etc. taken together that are used in a unit of industrial production. (Business Term) 13. The term 'plant' in common parlance has thus acquired a definite meaning and would normally .....

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eported in 157 ITR 86, would be of no use. In the said judgment, it was observed as under : 13. If the aforesaid test is applied to the drawings, designs, charts, plans, processing data and other literature comprised in the 'documentation service' as specified in Clause 3 of the agreement it will be difficult to resist the conclusion that these documents as constituting a book would fall within the definition of 'plant'. It cannot be disputed that these documents regarded collect .....

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he functional test indicated above. Obviously the purpose of rendering such documentation service by supplying these documents to the assessee was to enable it to undertake its trading activity of manufacturing theodolites and microscopes and there can be no doubt that these documents had a vital function to perform in the manufacture of these instruments; in fact it is with the aid of these complete and up-to-date sets of documents that the assessee was able to commence its manufacturing activi .....

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capital asset acquired, by the assessee, namely, the technical know-how in the shape of drawings, designs, charts, plans, processing data and other literature falls within the definition of 'plant' and therefore a depreciable asset. 14. The said observations were made however, in the background of the provisions of the Income-tax Act in the context of depreciation allowance in terms of Section 32 of the Income-tax Act. Section 43 of the Income-tax Act,1961 defines the term 'plant .....

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