9911796707
TMI Blog2018 (8) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... in which these orders are challenged, are briefly set out hereinbelow:- 3. By the Deed of Trust dated 27.06.2009 made by and between Axis Bank Limited, a settlor, and Axis Mutual Fund Trustee Company Limited, trustee, an irrevocable trust/trusts called Axis Mutual Fund was created. 4. Axis Mutual Fund Trustee Company Limited ("Trustee Company"), incorporated under the provisions of the Companies Act, 1956, was approved by Securities and Exchange Board of India ("SEBI") to act as a Trustee of the various scheme(s) of the Axis Mutual Fund. 5. Axis Asset Management Company Limited ("Axis AMC"), incorporated under the provisions of the Companies Act, 1956, was approved by SEBI to act as the Asset Management Company for the scheme(s) of the Axis Mutual Fund. 6. By the Deed of Trust dated 27th June, 2009, the settlor, inter-alia, declared and agreed that the Trustee Company shall manage the mutual fund in accordance with the applicable regulations. Further, as per para 6.1.1 of the Deed of Trust dated 27th June, 2009, the Trustee Company is allowed to float one or more schemes for the issue of units to be subscribed by the public. 7. The responsibility for the daily operations of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Board the place where such books of account, records and documents are maintained..... (3) The asset management company shall follow the accounting policies and standards as specified in Ninth Schedule so as to provide appropriate details of the scheme wise disposition of the assets of the fund at the relevant accounting date and the performance during that period together with information regarding distribution of accumulation of income accruing to the withholder in a fair and true manner. Regulation NO.52 Limitation on fees and expenses on issue of schemes 52 (1) All expenses should be clearly identified and appropriated in the individual schemes. ....." 11. It is undisputed fact that the Petitioner has maintained separate books of accounts and bank accounts for each fund in compliance of aforesaid regulations of SEBI. 12. The Gold ETF Scheme is an open-ended mutual fund scheme that invests money collected from investors in gold. These are passively managed funds and are designed to provide returns that would closely track the returns from physical gold in the spot market. The units of these ETFs can be bought or sold on a real time basis at the stock exchange in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as Exhibit 'G' and the sample copies of the documents for redemption of units against gold is also annexed as Exhibit 'H'. 19. The petitioner submits that the Axis AMC purchases gold based on requests received from the investors for creation of a unit against cash. Such purchases are made in the name of the petitioner. This purchased gold is stored with an independent custodian. Based on requests received from the unit holder/investor for redemption, this underlying gold is sold by the petitioner after levying appropriate VAT on the same. There is no dispute between parties in this regard. 20. It is clarified that the petitioner does not purchase/sell any gold when units are traded on the stock exchange. It is submitted that, the petitioner purchases gold from the registered dealer based on subscription requests received from investors. In the assessment year 2012-13, the petitioner purchased gold worth Rs. 522,48,59,036/- from a registered dealer located in the State of Maharashtra. On purchase of the gold, the petitioner has claimed set-off of the tax amount of Rs. 5,17,31,276/- under the provisions of section 48 of the MVAT Act read with Rule 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with interest of Rs. 1,08,77,770/- and penalty of Rs. 3,10,79,343/- was levied on the petitioner. A copy of the assessment order dated 31st July, 2015 is marked as Exhibit 'N'. Aggrieved thereby, an appeal was filed, but the first appellate authority allowed the appeal partially by confirming the dis-allowance of input tax credit under Rule 53(6)(b) of the MVAT Rules, 2005 and interest under section 30(3) of the MVAT Rules, 2002. However, he dropped the penalty. Copy of this order dated 29th March, 2017 is annexed to the petition as Exhibit 'R'. Thereafter, an appeal was preferred to the tribunal and an application for stay was made and an order of part payment was passed on 26th September, 2017. A rectification application was filed, which too has been dismissed by the order dated 7th November, 2017. Now, even the pending appeal before the tribunal is decided on 11th April, 2018. Then, it is claimed that an appeal has been filed by the UTI Mutual Fund being MVAT Appeal No. 18 of 2016, which is admitted. Placing reliance upon the same, it is urged that even this writ petition deserves to be allowed. 25. We have heard Mr.Sridharan learned counsel appearing for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is a separate Trust in itself. Accordingly, while assessing the liability of a trustee company, which is acting for and on behalf of the Axis Gold ETF Scheme, only receipts from this Trust/scheme are to be considered. Mr.Sridharan submits that every single document in relation to the mutual fund and the scheme is in public domain. A set of documents was also submitted before the assessing authority during the course of the assessment proceedings. Our attention is also invited to a consolidated document to urge that the above noted crucial points and the legal position are overlooked by the tribunal as well. 29. Mr. Sridharan then submits that even if all funds are to be considered, receipts on account of sales for the purpose of Rule 53(6)(b) of the MVAT Rules, 2005 should include receipts from the sale of securities. He would, therefore, submit that coupled with the definition of the term "goods", as appearing in section 2(12) of the MVAT Act, 2002, a non taxable element such as "goods consigned" is also comprehended within the expression "receipts on account of sale". Mr. Sridharan then criticises the finding in para 14 of the order of the tribunal to urge that the tribunal er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment schemes operated by dealer like Mutual Fund. Out of them, one scheme is Axis Gold ETF Scheme, in which, the dealer purchases gold bars as per the request of the investors and stores it for long time and when the investors are interested in redeeming it, that is in the form of sale of gold bars. The purchased gold bars of specific investors are sold after a long period of investment and onwards. It is, therefore, rightly concluded that though there are many schemes operating, the goods are not involved in all of them except this scheme of God ETF Scheme. This is fetching more income and that is how the benefit of Rule 53(6)(b) was not granted. That has been disallowed by assigning cogent reasons. This reasoning is consistent with Rule 53(6) of the Rules. It is this view, which has been upheld by the first appellate authority. Mr. Sonpal would submit that there is no error of law apparent on the face of the record or perversity in the findings and conclusions concurrently rendered. Hence, the writ petition be dismissed. 32. For properly appreciating the rival contentions, we must note the basic issue, which has been raised by the petitioner throughout and particularly bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order. The total demand is thus 7,30,36,456.36. Being aggrieved by this assessment order, an appeal was preferred before the first appellate authority and that appeal was partly allowed on 24th March, 2017. The penalty levied under section 29(3) was deleted, however, the Joint Commissioner (first appellate authority) held that input tax credit cannot be allowed for sales beyond six months of purchase. He confirmed the interest under section 30(3). Thus, the tax payment of Rs. 3,10,79,343/- and interest under section 30(2) of Rs. 1,08,77,770/- was confirmed. 34. In the appeal before the tribunal, various grounds were raised, but what we essentially find is that in the stay application and at the final arguments, an attempt was made to point out that independent balance-sheet is maintained by the petitioner in respect of each scheme. The exemption from payment of income tax as per section 10(23(d) of the Income Tax Act, 1961 was pointed out. The tribunal held that in the case of M/s. Religare Mutual Fund vs. The State of Maharashtra VAT Second Appeal No. 138 of 2013, decided on 27th April, 2016 it has already taken a view that an assessee of this nature is not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e MVAT Act. Then, we are concerned with the tribunal's finding and conclusion on the point that M/s. Religare is primarily doing the business of mutual fund and selling units of investment. Hence, it must be considered as to whether it is entitled to set-off on input tax credit. There, the gold bars worth Rs. 19,32,26,876/- was purchased as per the returns. This amount must have been received from the sale of units. The returns filed are nothing but documents of evidence and receipts. Thus, there are receipts during the financial year. Since heavy reliance is placed on Rule 53, we deem it proper to reproduce it:- "53. Reduction in set-off The set-off available under any rule shall be reduced and shall accordingly be disallowed in part or full in the event of any of the contingencies specified below and to the extent specified. (1) If the claimant dealer has used any taxable goods as fuel, then an amount equal to three per cent of the corresponding purchase price shall be reduced from the amount of set-off otherwise available in respect of the said purchase. (1A) On the purchases of natural gas to which sub-rule (1) does not apply, unless the natural gas purchased is resold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant dealer is a commission agent, to the place of business of his principal, then an amount equal to four per cent of the purchase price of the corresponding taxable goods not being goods treated as capital assets or used as fuel and natural gas shall be deducted from the amount of set-off otherwise available in respect of the said purchases. Provided that, if the taxable goods are despatched outside the State and the rate of tax specified in the SCHEDULE against the corresponding taxable goods purchases, is less than four per cent., then the reduction from set-off under this clause shall be calculated at such lower rate of tax specified in the SCHEDULE against the corresponding goods. Provided further that, the deduction provided in this sub-rule shall not apply if the goods dispatched are brought back to the State within six months of the date of dispatch whether after processing or otherwise: Provided also that, the provision of this clause shall not be applicable in respect of the contingencies specified in clause (b). (b) If the claimant dealer manufactures the goods covered under entries 5, 6, 7, 8, 9 and 10 of Schedule "D" appended to the Act and dispatches the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responding to the food and drinks (whether alcoholic or not) which are served, supplied or, as the case may be, resold or sold, and (ii) on the purchases of capital assets and consumables pertaining to the kitchens and sale, service or supply of the said food or drinks, and (c) in so far as the dealer is not hotel or restaurant, the dealer shall be entitled to claim set-off only on those purchases effected in that year where the corresponding goods are sold or resold within six months of the date of purchase or are consigned within the said period, not by way of sale to another State, to oneself or one's agent or purchases of packing materials used for packing of such goods sold, resold or consigned: Provided that for the purposes of clause (b), the dealer who is a manufacturer of goods not being a dealer principally engaged in doing job work or labour work shall be entitled to claim set-off on his purchases of plant and machinery which are treated as capital assets and purchases of parts, components and accessories of the said capital assets, and on purchases of consumables, stores and packing materials in respect of a period of three years from the date of effect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed in relation to any period starting on or after the 1st April 2005, as a reference to the corresponding goods (not being consumable, stores, or goods treated as capital assets, parts, components and accessories of capital assets which are resold or are so dispatched outside the State or are used in relation to the manufacture of goods so sold or dispatched and are contained in the goods so sold, resold or dispatched and the packing material used along with the goods so sold, resold or dispatched. Any reference to the corresponding purchase price, corresponding taxable goods or corresponding purchases of packing material shall be construed accordingly. (b) while reducing set-off under, - (i) sub-rule (2), for the purpose of determining the purchase price of the corresponding taxable goods, where it is not possible to ascertain the purchase price by reference to the books of account, the ratio of the sale price of the taxable goods and tax free goods or where there is no sale price, the value of the taxable goods and tax free goods shall be applied; and (ii) sub-rule (3), the ratio of the value of the goods inclusive of any duty of Excise as it appears in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods are sold or resold within six months of the date of purchase or are consigned within the said period, but by way of sale to another State, to oneself or one's agent or purchases of packing materials used for packing of such goods sold, resold or consigned. Thus, the set-off is restricted to those purchases effected in that year where the corresponding goods are sold or resold within six months of the date of purchase. The proviso deals with a case of a manufacturer and the explanation says that for the purposes of this sub-rule, the receipts means the receipts pertaining to all activities including business activities carried out in the State but does not include the amount representing the value of the goods consigned not by way of sales to another State to oneself or one's agent. 38. In this regard, M/s. Religare argued that it is entitled to claim set-off/input tax credit. However, the tribunal held that it is not entitled to for, firstly, the evidence does not indicate with exactitude which goods were sold by M/s. Religare. Whether the goods purchased by it were sold within a period of six months or not is not established by M/s. Religare by adducing cogent, relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from investors are excluded. Further, M/s. Religare is in the business of selling units to the investors as well as selling gold as a policy of investment. The amounts received are receipts and the final argument was dealt with by distinguishing certain orders of the tribunal. The conclusion reached is that because the requirement of Rule 53(6) (b) is not satisfied, the set-off has to be restricted to only those purchases effected in the subject year where the corresponding goods are sold or resold within six months. 41. The petitioner before us would try to distinguish its case from M/s. Religare and in that process, it would rely upon the principle of multiple schemes under a single Trust Deed. We are only concerned with Axis Gold ETF Scheme. The petitioner has said that it is not engaged in the business of sale or purchase of goods liable to be taxed under the MVAT Act in any scheme except the Axis Gold ETF Scheme. It submitted that each scheme floated is a separate trust and therefore, while assessing the liability of a trustee company, which is acting for and on behalf of Axis Gold ETF Scheme, only receipts from this scheme are to be considered. 42. We are afraid, we cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with Rule 52 of the MVAT Rules. It duly adjusted the set-off claimed of Rs. 3,10,79,343/- against its output VAT liabilities in accordance with the provisions of Rule 55 of the MVAT Rules. Consequently, the petitioner applied for refund of excess input tax credit amounting to Rs. 2,06,51,993/and relied upon sample copies of the invoices for sale of gold. It also relied upon the tax liability discharged on the sale of gold by referring to the audit reports. It submitted its details, but the assessing officer was not satisfied on the ground that the goods purchased by the petitioner, on which input tax credit is claimed, are sold within a period of six months from the date of purchase. The argument was that this Rule 53(6)(b) is not applicable. 43. We do not see any merit in this argument either. The entire foundation of the argument is that each trust floated by the company is a separate trust in itself and while assessing the liability of the trustee company, which is acting for and on behalf of Axis Gold ETF Scheme, only receipts from this trust/scheme are to be considered and merely because the same person acts as a trustee for different schemes will not affect the legal posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient to meet the charges of collection of the income of the trust fund and the remuneration of the trustees and of the committee of management and the other costs, charges, expenses and outgoing relating to the trust, the trustees are enjoined to make good such deficit out of the income or corpus of the Reserve Fund and for that purpose, they may transfer to the Family Trust Expenses Account such sums as may be required. Then clause 7 was referred, which is in relation to 3.5 equal units of corpus of the Trust Fund granted to the Family Trust Expenses Account. For the assessment year 1959-60 and the assessment years prior thereto, the incomes accruing to the Reserve Fund and the Family Trust Expenses Account were aggregated in a single assessment made on the trustee of the Nizam's Family Trust. But, thereafter, the assessee's appeals were allowed by the Appellate Assistant Commissioner against assessment for the years 1955-56 to 195960 and the incomes of the two funds were separately assessed for the assessment years 1960-61 and 1961-62. Thus, the assessee was described in the one case as the trustee of the Nizam's Family Trust Reserve Fund and in the other as the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngle Deed of Trust. There may be separate schemes, but there was never any intent as is now sought to be culled out and to create separate Trust. This is not a case where separate Trusts were created and hence, the principle relied upon by Mr. Sridharan from several works on Law of Trust and to the effect that receipts from Axis Mutual Fund ETF alone have to be considered for there is formation of more than one trust by the Deed of Trust and that is permissible, has no application. This has no application here because the earlier principle and based on the case of Commissioner of Income Tax, Bombay City 1, Bombay vs. Manilal Dhanji, (1962) 44 ITR 876 Bombay is inapplicable. This is not a case where the settlor has created more trusts under a single Trust Deed. This is a clear case where the Deed of Trust permits floating one or more schemes. That is not equivalent to creation of separate Trusts. It is in these circumstances that the assessing officer, the first appellate authority and the tribunal all rightly concluded that the set-off available under Rule 53 has to be reduced. It shall be accordingly in part or full in the event of any of the contingencies specified and to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X
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