TMI Blog2014 (7) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... ttery tractor - We are of the opinion that a battery is an essential component for the functioning of the tractor and is an integral part of the tractor. Consequently, a battery would be covered under the notification dated 15.1.2000. Jurisdiction of AO - reasons to believe to impose tax - The words “has reasons to believe” must not be arbitrary or irrational but must be based on reasons which are relevant and germane to the issue. The formation of the required opinion and belief by the assessing officer is a condition precedent. Without such formation, the assessing officer will have no jurisdiction to initiate proceedings under Section 21 of the Act Held that: - the assessing officer as well as the Additional Commissioner, while granting permission, was of a belief that tractor battery is liable to be taxed as an unclassified item @ 10%. Such belief was based on comparison of the notification dated 9.5.2003 wherein batteries were included as a component, parts and accessories of a vehicle, which excluded tractor and consequently had a reasonable belief and formed an opinion that non-exclusion of battery in the notification dated 15.1.2000, which related to parts and accessorie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M or I 5.00% (ii) Parts and accessories and attachments of tractors and Harvesters of all kinds other than tyre, tube, spark plug and Tractor Trollies. M stands for sale by the manufacturer in Uttar Pradesh. I stand for sale by the importer in Uttar Pradesh. A perusal of the aforesaid notification indicates that parts and accessories and attachment of tractors of all kinds other than tyre, tube, spark plug and tractor trollies is taxable @ 5%. The assessing officer, on the basis of this notification dated 15.1.2000, treated sale of tractor batteries as part/accessory of a tractor and imposed 5% as tax. Under Section 3-A of the Tax Act, the State Government issued another notification dated 29.1.2001. Entry No.18 is relevant for deciding this issue, which is extracated hereunder: Sl.No. Description of goods Points of tax Rate of tax percentage 18 (i)(a) Motor vehicles including chassis of motor vehicles, but excluding lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Pradesh. Under this notification components, parts and accessories of vehicles, which includes batteries and trailers for motor vehicles, but excluding light commercials vehicles, two wheelers, tractors and harvester combines would be taxable @ 12%. Under Entry No.18 of the notification dated 29.1.2001, as amended by notification dated 9.5.2003 the word battery has been included in component parts and accessories to be taxable @ 12%, which are used in light motor vehicles other than tractor, whereas under Entry No.46 of the notification dated 15.1.2000, the word battery has not been indicated in the notification and it only states that parts and accessories and attachments of tractors of all kinds other than tyre, tube, spark plug and tractor trollies. The notification dated 15.1.2000 is wider since it includes all kinds of parts and accessories and attachment of tractors except specified parts and accessories and attachments which have been specifically excluded whereas in the notification dated 29.1.2001, as amended on 9.5.2003, battery has been included as a component, part or accessory for motor vehicles only. Based on Entry No.18 of the notification dated 9.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 21 of the Act for the assessment year 2001-02, has filed the present writ petition. We have heard Sri Bharatji Agarwal, the learned senior counsel assisted by Sri Subham Agarwal the learned counsel for the petitioner and Sri C.B.Tripathi, the learned Special Counsel for the State of U.P. The learned senior counsel contended that there is no ambiguity in the interpretation of the notification dated 15.1.2000 and that a perusal of Entry No.46 of the notification dated 15.1.2000 clearly indicates that all kinds of parts and accessories and attachments of tractors are exigible to tax @ 5%. The learned Senior Counsel submitted that battery is a part of a tractor, if not an accessory. Further, the words of all kinds will include everything which the tractor requires even if the said part may not be an integral part of a tractor. The learned senior counsel submitted that the words other than used in Entry 46 gives a specific exclusion to certain parts and accessories and attachments which will not be taxed @ 5% and such exclusion does not include the word battery . Consequently, the word battery would be included as a part, if not, as an accessory to a tractor, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t consideration. The formation of the required opinion and belief by the assessing officer is a condition precedent. Without such formation, the assessing officer will have no jurisdiction to initiate proceedings under Section 21 of the Act. The aforesaid view was also held by this by a Division Bench of this Court after considering various judgements of the Supreme Court in M/s S. K. Traders, Modi Nagar, Ghaziabad vs. Additional Commissioner, Grade-I, Trade Tax, Zone Ghaziabad and another, 2008 UPTC 392. Similar view was reiterated by another Division Bench in Anand Prakash Agarwal vs. Commissioner of Income Tax (Central) and others, Writ Petition No.1367 of 2005 and other companion cases, decided on 29.5.2014. The Division Bench after considering the case in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd., (2007) 291 ITC 500 (SC), held that at the stage of issuance of notice the only question to be considered was whether there was relevant material on which a reasonable person could have formed the requisite belief. In M/s Rubber Chem Sadabad Gate Hathras vs. The Additional Commissioner Grade-I, Commercial Tax, Aligarh Zone, Aligarh a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is the existence of the belief but not the sufficiency or reasons for the belief. At the same time, the belief must be held in good faith and should not be a mere pretence. From a perusal of the aforesaid, it is apparently clear that the words reason to believe in Section 21 of the U.P. Trade Tax Act conveys that there must be some rational basis for the assessing authority to form a belief that the whole or any part of the turnover of a dealer has for any reasons escaped assessment. Such reason or reasonable ground to believe that the whole or any part of the turnover had escaped assessment must be germane to the formation of the believe regarding escaped assessment. Such reasons or grounds must have a nexus with the formation of the belief. The approach has to be practical and not pedantic. In the light of the aforesaid, in the instant case, we find that the assessing officer as well as the Additional Commissioner, while granting permission, was of a belief that tractor battery is liable to be taxed as an unclassified item @ 10%. Such belief was based on comparison of the notification dated 9.5.2003 wherein batteries were included as a component, parts and accessories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or vehicle. Motor battery therefore continued to remain taxable under 1956 notification. It was argued by learned Standing Counsel that as the State Government treated batteries as accessories or parts it could not be treated as component part. The argument does not appeal because if an article is component then it does not become accessory or part only because it is mentioned along with accessory. Then there is very little difference in part or component part. An article may be part but if it is component part then it has to be understood in that sense if the word component is used in the notification. A battery may be electrical equipment or electrical goods but as it is component part of motor vehicle and there being specific entry of it battery sold for motor vehicles cannot be held taxable under Notification 7996 of 1965. In Thanjavur Leather and Autoliners Industrial Co-operative Society Limited vs. The State of Tamil Nadu, 1983(52)STC 343 , a Division Bench of the Madras High Court, while analysing the meaning of the words spare parts , held that when a person purchase a battery to replace an existing battery, the said battery is a spare part. In Vikas Traders v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has been included as a part or a component of a motor vehicle. In fact, a reading of this notification is helpful to the case of the petitioner. If a battery can be included as a part or an accessory or as a component of a motor vehicle, there is no reason why it cannot be included as a part or accessory of a tractor. The belief of the authorities that since there is no mention of the word battery in the notification dated 15.1.2000 and, consequently, battery has to be taxed as an unclassified item is based on total non-application of mind. While forming an opinion, the authorities have not considered the words parts and accessories of all kinds under Entry No.46 of the notification dated 15.1.2000. Consequently, we are of the opinion, that there was no rational reasoning by the authorities in forming an opinion that the turnover of the petitioner had escaped assessment. The notification dated 15.1.2000 is explicit, which leaves no room for doubt that battery is an essential part of a tractor requiring it to be taxed @ 5%. The Court is of the opinion, that formation of the opinion by the authority was a clear case of total nonapplication of mind to the relevant issue wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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