TMI Blog2018 (8) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Petition dismissed - decided against petitioner. - Writ Petition No. 710 of 2018 - - - Dated:- 6-8-2018 - S. C. DHARMADHIKARI SMT. ANUJA PRABHUDESSAI, JJ. Mr. V. Sridharan-Senior Advocate with Mr. Prakash Shah I/b M/s. PDS Legal for the petitioner. Mr. V. A. Sonpal-Special Counsel with Mr. B. V. Samant-Assistant Government Pleader for respondent nos. 1, 3 and 4. P.C. :- 1. By this petition under Article 226 of the Constitution of India, the petitioner seeks a writ of certiorari or any other appropriate writ, order or direction in the nature thereof calling for the records pertaining to the impugned orders dated 26th September, 2017, 7th November, 2017 and 11th April, 2018 and after scrutinising the legality and validity thereof, to quash and set aside the same. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of property The Trustee Company shall ensure that proper and separate accounting records are maintained for each scheme. 6.1.14 Functions of Trustee Company Distribute dividend and income of the relevant Scheme, as and when the same may become due and payable. 9. A trust is an obligation annexed to the ownership of property. As clearly evident from Deed of Trust, such obligations are towards the beneficiaries of each scheme and not towards the beneficiaries of all the schemes put together. 10. The relevant portion of the SEBI (Mutual Fund) Regulations, 1996, reads as under:- Definition of mutual fund (a) mutual fund means a fund established in the form of a trust to raise monies through the sale of units to the public or section of the public under one or more schemes for investing in securities including money market instruments or gold or gold related instruments or real estate assets. Provided that infrastructure debt fund schemes may raise monies through private placement of units, subject to conditions specified in these regulations. Regulation No.50 50. (1) Every asset manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Trust dated 27th June, 2009 involves the sale or purchase of goods liable to be taxed under MVAT Act, 2002. There is no dispute between the parties in this regard. 16. As per terms of the Scheme Information Document, the investment objective of the Gold ETF Scheme is to generate returns that are in line with the performance of gold. The corpus of the Scheme is to be invested in Gold Bullion of fineness (for purity) of 995 parts per 1,000 (99.5%) or higher. The value of one unit of the Scheme is termed as Net Asset Value (i.e. NAV per unit = Value Assets-Liabilities /number of units). The NAV of gold ETFs is closely related to the value of gold held by the scheme. The value (price) of gold may fluctuate for several reasons and all such fluctuations will result in changes in the NAV of gold ETFs. 17. As the Axis Gold ETF scheme is a passively managed scheme, transactions undertaken in the scheme can broadly be classified as follows:- (a) Creation of units against Cash; (b) Creation of units against Gold; (c) Redemption of units against Cash; (d) Redemption of units against Gold; 18. A copy of the process flow for each of the above listed transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Sales Tax (assessing authority). During the course of assessment proceedings, the petitioner has submitted the following details/documents:- Sr.No. Submission Exhibits 1 Annual Report, trustee Report, Independent Auditor's Report and Financial Statement for all 35 individual funds/scheme before Assessing Authority. These reports are for each of the 35 individual funds/scheme. When filed as a single compilation/document, it is called as an annual report in the mutual fund industry. 2 Independent Auditor's report and Financial statement for Axis Gold ETF Scheme K 3 Consolidated document integrating/containing summation of receipts for each of the 26 individual funds/schemes L 4 Various documents viz. Sale/purchase statement, proof of receipt of Gold when purchased, Inventory details, bank book, fixed assets details, Misc. Income details M 23. During the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a legal concept or relationship. Thus, it is not a legal or juristic person, but an obligation annexed to the ownership of property. A Trust is formed by a legal document termed as a Deed of Trust. It is typically entered into between the author of the Trust and the trustees. From the perspective of mutual fund, though a Trust cannot be formed without a Trust Deed in writing, it is pertinent to note that there is no bar on creating multiple Trusts through a single Trust Deed. As such, different Trusts can be identified by different groups of beneficiaries for each such Trust or different classes of properties vested with each Trust. Mr.Sridharan then invites our attention to section 54 of the MVAT Act, 2002 and particularly sub-section (5) thereof to submit that if a Trust is terminated, the beneficiaries shall be liable to pay tax due from the Trust up to the time of the termination of the Trust and accordingly, till the time the Trust is not terminated, a trustee is only a representative assessee of the beneficiary of the Trust. 27. Mr.Sridharan submits that by a Deed of Trust dated 27th June, 2009, an irrevocable Trust is created. That is called Axis Mutual Fund made betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding the view of the first appellate authority that set-off on the goods not sold within six months should be denied. Thus, Mr.Sridharan submits that all of these have misread Rule 53(6) (b) of the Rules. 30. Mr. Sridharan, in support of his contentions, relied upon the works of imminent authors on the Indian Trust Act and a judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Andhra Pradesh and Anr. vs. Trustees of H. E. H. the Nizam's Family Trust (1986) 4 SCC 352. 31. On the other hand, Mr. Sonpal would submit that the writ petition has no merit. Further, he would submit that though parties on par with the petitioner have filed a Maharashtra VAT Appeal and that appeal is pending, still, in this case, the tribunal's view is correct and should not, therefore, be reversed. He would submit that the view taken by the tribunal together with that of the first appellate authority is correct both, on law and facts. Mr. Sonpal submits that the Deed of Trust in this case clearly says that Axis Bank Limited is a banking company and is referred to as a settlor, whereas, Axis Mutual Fund Trust Limited is a trustee company. However, the arran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors. Each scheme bears separate balance-sheet and account and on 31st March every year as per the Accounting Standards and Policies specified in the 9th and 11th Schedule of the SEBI (Mutual Fund) Regulations, 1996 as amended and the accounting guidelines suggested by the Institute of Chartered Accountant of India. The statutory auditors have to provide separate audit report. 33. The petitioner-appellant has one scheme Axis Gold ETF, which is a exchange traded fund. As per the objective of the scheme, it is mandatory on the part of the petitioner to invest in gold, for and on behalf of the investors. The security is in the form of gold, and it is held by the scheme as investment and not as stock in trade . Under this scheme, there are both, sales and purchases of gold. The petitioner is registered under the MVAT Act and the CST Act. The gold is purchased from open market after paying necessary VAT and other settlement charges as applicable. Similarly, when the gold is sold in open market, corresponding VAT payable on sale of gold is paid. Under this scheme, there is purchase and sale of gold in the State of Maharashtra. Hence, the petitioner is registered as a reseller of gol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was dealing in precious metals, namely, gold bars. It purchased gold bars in the quantity of 1 Kg. and its multiples from dealers registered under the MVAT Act. M/s.Religare Mutual Fund urged that it is entitled to set-off of the tax paid by its vendors as prescribed by section 48 of the MVAT Act. It was further argued that when the gold bars were sold by it, it collects 1% Vat from its customers. There are periodical returns submitted in the prescribed form under the Act. The Religare/dealer desired set-off on its purchases as per the provisions of section 48 of the Act. It filed refund application invoking section 51 of the MVAT Act for the period 2009-10 and claimed refund of ₹ 19,21,808/-. As far as the refund was concerned, the claim came to be considered and the Deputy Commissioner of Sales Tax, on perusal of the documents and record, passed an assessment order for the period 27th January, 2010 to 31st March, 2010. He rejected major portion of the claim of set-off of input tax credit as per the provisions contained in Rule 53(6)(b) of the Rules on the ground that receipts on account of sales of M/s. Religare are less than 50% of its total receipts in that financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -off otherwise available in respect of the said purchases. Explanation For the purpose of this sub-rule, natural gas will be deemed to have been sold or resold if the sale is after conversion from one form of natural gas to another form. (2) (a) If the claimant dealer manufactures any tax free goods then an amount equal to the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 of the purchase price of the corresponding taxable goods purchased by him not being goods treated as capital assets or used as fuel and natural gas shall be reduced from the amount of set-off otherwise available in respect of the said purchases. Explanation For the purpose of this clause manufactured tax free goods will not include,- (a) sarki pend, de-oiled cakes, and (b) any other goods covered by SCHEDULE A, if they are sold in the course of export out of the territory of India covered by section 5 of the Central Sales Tax Act, 1956. (b) If the claimant dealer re-sells any tax free goods and the tax-free goods are packed in any material, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable in respect of the aforesaid manufactured goods. (4) If the claimant dealer has made a sale by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract then, if the claimant dealer has opted for composition of tax under sub-section (3) of section 42, the corresponding amount of set-off other than the set-off pertaining to purchases of capital assets and set-off pertaining to goods in which property is not transferred shall be reduced and the set-off shall be allowed and calculated, - (a) by multiplying the said amount of set-off by the fraction 16/25 where the dealer has opted to pay tax @ 8% on the total contract value, and (b) in respect of periods starting on or after 20th June 2006 by reducing from the amount of set-off a sum equal to 4% of the purchase price on which such set-off is calculated where the dealer has opted to pay tax @ 5% on the total contract value in the case of construction contracts. Explanation .-For the purpose of this sub-rule, the expression Claimant dealer shall also include a subcontractor if the principal contractor has awarded the contract or part of contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's agent. (7) *****deleted***** (7A) If the claimant dealer has purchased office equipment, furniture or fixtures and has treated them as capital assets and he is not engaged in the business of transferring the right to use these goods (whether or not for a specified period) for any purpose, then the corresponding amount of set-off to which he is otherwise entitled shall be reduced by an amount equal to three per cent. of the purchase price on which such set-off is calculated and the balance shall be allowed. (7B) If the claimant dealer is holding a licence for transmission or as the case may be, distribution of electricity under the Electricity Act, 2003 or is a generating company as defined in the said Act, then in respect of the periods starting on or after the 1st April, 2005, save as otherwise provided under sub-rule (1) and (1A), an amount equal to the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 of the purchase price of the goods purchased including goods treated as capital assets by him for use in the generation, transmission, or, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the said date, shall be allowed to the extent of tax paid on purchases in excess of the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 on the purchase price, - (a) as regards the goods in respect of which property is transferred during the said processing, and (b) as regards packing materials used for packing of the said textiles, and (c) as regards other purchases including purchases of capital assets shall be calculated as permissible under other rules. (11) (a) If the claimant dealer is engaged in the business of transferring the right to use (whether or not for a specified period) for any purpose, of passenger motor vehicles, then he shall be entitled to claim set-off of tax paid on the purchase of such motor vehicles only to the extent of tax payable on such transfer of right to use; (b) the set-off as determined under clause (a) in respect of such vehicles shall be claimed in the period in which such right to use has been transferred by the claimant dealer. 37. A bare perusal of Rule 53 would reveal that it is titled as R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r finding and in para 13 of the order in the case of Religare (supra), the tribunal held thus: 13. Appellant submitted that his activities are multi-State; therefore, receipts are not only in relation to the business activities in Maharashtra State. The term gross receipts appearing in Rule 53, is not defined in the Act or the Rules; therefore it should be construed to mean Gross receipts in relation to sale of goods or activities; such as labour job in relation to goods; and not in relation to receipts out of investment business like that of the Appellant of sale of units to investors. He further submitted that the term gross receipts should also be construed to mean receipts from business carried out in the State of Maharashtra only. We are afraid; we are unable to accept this submission of the appellant. It is not necessary for the purpose of Rule 53 that the term gross receipts should be restricted; only to the receipts from a particular kind of business or to the business activities within a particular State only. The fact that the appellant holds single PAN for all its business activities, itself shows that all the business activities are of single business entity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted under the applicable laws and for providing facilities for participation by subscribers and holders of units as beneficiaries in the schemes. The trustee company Axis Mutual Fund Trust Limited has entrusted the sum of ₹ 1 lakh as initial contribution towards the corpus of the mutual fund and then it is stated that the trustee company, namely, Axis Mutual Fund Trust Limited shall offer to the public the units in the schemes for making group or collective investments in accordance with and as permitted under the regulations and subject to the terms and conditions set out. It then says that at the request of the settlor, the trustee company has agreed to act as the trustee of the Mutual Fund in accordance with the terms and conditions specifically set out, as is testified by the execution by them of these presents and in accordance with the regulations and in accordance with the provisions of the Indian Trust Act, 1882. It is also intended that this Trust Deed be binding on the unit holders of the relevant schemes to the extent permissible under applicable laws. Thereafter, there are various clauses and which include investment limitations, responsibilities, obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered receipts on account of sale of gold in the numerator (receipts on account of sale) from these financial statements of Axis Mutual ETF. However, the assessing authority has considered total receipts of schemes in the denominator from this consolidated printout of 26 schemes. Hence, all the authorities have considered receipts from the activities of all schemes instead of considering the receipts of Axis Mutual ETF Scheme alone. This is taken to be an erroneous approach. 44. We find no merit in the argument of Mr. Sridharan in this behalf. The sheet anchor of this argument is the judgment in the case of Nizam's Family Trust (supra). Nizam's Family Trust was a case arising under the Income Tax Act. The Revenue preferred appeal against the common judgment of the High Court of Andhra Pradesh, because it answered the questions framed by the Hon'ble Supreme Court in favour of the assessee. One of the questions was, whether the income arising from the Reserve Fund and the Expenses Account of the Nizam's Family Trust Deed dated 10th May, 1950 can be aggregated in a single assessment for each of the assessment years 1960-61 to 1965-66. There, the facts were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der clause (a) of section 147 of the Income Tax Act, 1961 in order to assess the trustees on the combined income of the Reserve Fund and the Family Trust Expenses Account. He made separate original assessments for the assessment years 1962-63 to 1965-66. The assessee appealed and the first appellate authority cancelled the assessment for all the years. The Revenue appealed to the Income Tax Appellate Tribunal, but the view taken by the first appellate authority was upheld by the tribunal and the appeals were dismissed. Then, the questions were referred for opinion of the High Court of Andhra Pradesh and they were answered in the negative. Hence, the Revenue appealed. That is how the primary question in the appeals before the Hon'ble Supreme Court was whether the incomes arising from the Reserve Fund and the Family Trust Expenses Account can be assessed separately or not. 45. Mr. Sridharan's reliance on paragraphs 7, 8, 9 and 11 must be seen in this context. The tax was not identical to the one before us. It was a distinct tax legislation, namely, the Income Tax Act, 1961. The issue was, whether the incomes arising from the Reserve Fund and the Family Trust Expenses Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of sale are less than 50% of the total receipts, then, insofar as the dealer, who is not a hotel or restaurant, the set-off is permissible only on those purchases effected in that year where the corresponding goods are sold or resold within six months from the date of purchase. There is no creation of separate Trusts, but separate schemes under a single Trust Deed are floated. 47. To our mind, therefore, none of the authorities were in any error nor their view can be termed as perverse while granting partial relief to the petitioner. We do not see how the view taken by the first appellate authority in the facts and circumstances peculiar to the petitioner's case is perverse. We are of the view that the conclusion reached by the first appellate authority is imminently possible. It is evident from the same that the petitioner obtained registration under the MVAT Act. It invested in the gold and disposed it of, may be on behalf of the customers. However, it paid VAT on it and was held liable to pay interest if the payment of VAT is delayed. Hence, the first appellate authority has rightly concluded that the tax amount, together with interest is payable. He confirmed the deman ..... X X X X Extracts X X X X X X X X Extracts X X X X
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