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Allahabad High Court · body

2014 DIGILAW 2705 (ALL)

K. J. Resels Pvt. Ltd. v. C. T. T.

2014-09-03

B.AMIT STHALEKAR

body2014
JUDGMENT B. Amit Sthalekar, J. 1. This Trade Tax Revision arises out of the order of the Commercial Tax Tribunal dated 24.5.1999 whereby the Tribunal has partly allowed the appeal of the revisionist holding that he is entitled for exemption for 5 years under Section 4-A(1) of the U.P. Trade Tax Act, 1948 (the Act) from the date of registration of the sale deed i.e. 26.6.1987 to 22.12.1991. 2. Briefly stated, the facts of the case are that the revisionist is engaged in the manufacturing of Diesel Engine, Generating-Sets, Alternators etc. and established a new unit within the meaning of Section 4-A of the Act. The new unit was established on the land and building situated at 11-C/864 Naraich, Hathras Road, Agra through a registered agreement to sale dated 20.10.1986 on a payment of Rs. 25,000/- which was made by cheque no. 373587 dated 17.10.1986 drawn on the Central Bank of India, Agra. The remaining consideration amount of Rs. 2,25,000/- was to be paid at the time of execution of the sale deed. Under the agreement to sale, the seller-Shri Baijnath Agarwal handed over the vacant possession of the land and building constructed thereon to the revisionist and also executed an affidavit to that effect. 3. On 31.10.1986 the revisionist applied to the General Manager, District Industries Center Agra for provisional registration of the proposed SSI unit and on 1.12.1986 the provisional registration was granted showing the address of the unit as Naraich, Hathras Road, Agra. The new unit commenced trial production on 1.12.1986 and the first sale took place on 23.12.1986 and therefore it is claimed that the revisionist is entitled for exemption from payment of trade tax for a period of 5 years w.e.f. 23.12.1986 to 22.12.1991. The revisionist preferred an application under Section 4-A of the Act for the grant of eligibility certificate which was initially recommended by the District Level Committee but was subsequently cancelled by the Divisional Level Committee. Aggrieved by the said order the revisionist filed a review application on 3.4.1992 which was rejected on 21.12.1992. The revisionist then filed writ petition no. 29 of 1993 and by order dated 18.7.1995 the matter was remanded for reconsideration by the Divisional Level Committee. The Divisional Level Committee reconsidered the matter and rejected the application of the revisionist for the grant of eligibility certificate by its order dated 19.9.1997. The revisionist then filed writ petition no. 29 of 1993 and by order dated 18.7.1995 the matter was remanded for reconsideration by the Divisional Level Committee. The Divisional Level Committee reconsidered the matter and rejected the application of the revisionist for the grant of eligibility certificate by its order dated 19.9.1997. Aggrieved by the said order the revisionist then filed an appeal before the three member Bench of the Tribunal being Appeal No. 133 of 1997. The appeal was partly allowed by the Tribunal by the impugned order dated 24.5.1999 and the order of the appellate authority dated 19.7.1999 was set aside and a direction was issued to the Divisional Level Committee, Agra to issue eligibility certificate to the appellant unit for the grant of tax exemption under Section 4-A of the Act for the period from 14.8.1987 to 22.12.1991. 4. Heard Shri Pradeep Kumar Agarwal, learned counsel for the revisionist and Shri Sanjeev Shankdhar, learned Addl. Chief Standing Counsel for the opposite party. 5. The submission of Shri Pradeep Agarwal, learned counsel for the revisionist is that admittedly in pursuance of the agreement to sale, the revisionist had entered into possession of the land and the building in question and agreement to sale was also registered on 20.10.1986. No doubt the sale deed was executed on 26.6.1987 and was registered on 14.8.1987 but the revisionist being in possession of the property in question he would be entitled for the benefit of exemption under Section 4-A of the Act from 20.10.1986 i.e. the date of registration of the agreement to sale and the date he came into possession of the property in question and therefore the Tribunal had clearly erred in partly allowing his appeal and directing the Divisional Level Committee to grant exemption with effect from the date of registration of the sale deed i.e. 14.8.1987 for a period of 5 years i.e. upto 22.12.1991. He has referred specifically to the provisions of Section 4-A(5) of the Act and the Explanation (1) thereto particularly clause (c) thereof. 6. The question of law framed by the revisionist is that whether the Tribunal was right in curtailing the period of exemption from the date of first sale to the date of registration of the sale deed. However, the ground no. 6. The question of law framed by the revisionist is that whether the Tribunal was right in curtailing the period of exemption from the date of first sale to the date of registration of the sale deed. However, the ground no. (b) taken by the revisionist is whether the Tribunal was justified in treating the word 'owned' or 'taken on lease' to be on the same footing when the applicant is already in possession by virtue of registered agreement to sale. In my opinion the question of law would have to be re-framed to read as to: "whether the Tribunal was wrong in ignoring the date of ownership accruing from the date of entry into possession with effect from 20.10.1986 i.e. the date of registration of the agreement to sale and when the petitioner came into possession of the property in question for the purposes of determining the ownership as being the first date for grant of exemption?" Section 4-A(5) of the Act and the explanation thereto read as under: "4-A (5) A manufacturer shall be entitled to the facility of exemption from, or reduction in the rate of tax, notified under sub-section (1),- (a) ............ (b) ............ (c) in relation to a new unit referred to in Explanation (1), where the conditions specified in Clauses (a) to (d) of the said Explanation (1) are fulfilled on a period of facility notified under sub-section (1), then subject to the provisions of Clause (b), only for part of the period, notified under sub-section (1), which shall be computed from the date on which all the conditions referred to in the said Clauses (a) to (d), have been fulfilled or July, 20, 1992 whichever is later, till the end of the period of such facility, so however, that a manufacturer who was eligible for such facility under Clause (c) as it stood prior to July 20, 1992 and had applied for the facility prior to the said date, shall be entitled to the facility in accordance with the said clause (c)." Explanation (1) to Section 4-A and clause (c) read as under: "Explanation.-For the purposes of this Section- (I) 'new unit' during the period ending with March 31, 1990 means an industrial undertaking set-up by a dealer on or after October 1, 1982 but not later than March 31,1990- (a) ...................... (b) ..................... (b) ..................... (c) on land or building or both owned or taken on lease for period of not less than seven years by such dealer or allotted to such dealer by any Government company or any corporation owned or controlled by the Central of the State Government; (d) ......................... (e) ......................... " 7. The word owned has been interpreted by the Supreme Court in the case of Mysore Mineral Ltd. Vs. Commissioner of Income Tax (1999) 239 ITR 775 (SC). For determining as to what 'ownership' means the Supreme Court has referred to the meaning of the word as expressed in the Black's Law Dictionary (6th Edition), Dias on Jurisprudence (4th edition, at page 400) and Stroud's Judicial Dictionary. For the sake of brevity it is not necessary to quote the dictionary meaning as they have already been dealt with by the Supreme Court in the case of Mysore Minerals Ltd. (supra). However, the Supreme Court has relied upon its earlier decision in CIT Vs. Podar Cement Pvt. Ltd. (1997) 226 ITR 625 (SC), the relevant paragraph of which reads as under: "In CIT v. Podar Cement Pvt. Ltd. : [1997] 226 ITR 625 (SC), the question which came up for consideration before this court was whether the rental income from the house property which had come to vest in the assessee, but as to which the assessee was not legal owner for want of deed of title, was liable to be assessed as income from house property or as income from other sources. To be assessable as income from house property within the meaning of section 22 of the Act the property should be such "of which the assessee is the owner". This court upon a juristic analysis of the underlying scheme of the Act and resorting to contextual and purposive interpretation, also having reviewed several conflicting decisions of different High Courts, held that the liability to be assessed was fixed on a person who receives or is entitled to receive the income from the property in his own right vide para. 55, this court has held (page 653): "We are conscious of the settled position that under the common law, 'owner' means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. 55, this court has held (page 653): "We are conscious of the settled position that under the common law, 'owner' means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But, in the context of section 22 of the Income-tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, 'to tax the income', we are of the view, 'owner' is a person who is entitled to receive income from the property in his own right." 8. The Supreme Court has further held as follows: "Podar Cement's case : [1997] 226 ITR 625 (SC), is under the Income-tax Act and has to be taken as a trend-setter in the concept of ownership. Assistance from the law laid down therein can be taken for finding out the meaning of the term "owned" as occurring in section 32(1) of the Act." It has also been held by the Supreme Court as under: "In our opinion, the term "owned" as occurring in section 32(1) of the Income-tax Act, 1961, must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. "Building owned by the assessee" the expression as occurring in section 32(1) of the Income-tax Act means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as the Transfer of Property Act and the Registration Act, etc., but nevertheless is entitled to hold the property to the exclusion of all others." 9. The Supreme Court further in Mysore Mineral Ltd. has held as under: "It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The Supreme Court further in Mysore Mineral Ltd. has held as under: "It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent. To take the case at hand it is the appellant-assessee who having paid part of the price, has been placed in possession of the houses as an owner and is using the buildings for the purpose of its business in its own right. Still the assessee has been denied the benefit of section 32. On the other hand, the Housing Board would be denied the benefit of section 32 because in spite of its being the legal owner it was not using the building for its business or profession. We do not think such a benefit-to-none situation could have been intended by the Legislature. The finding of fact arrived at in the case at hand is that though a document of title was not executed by the Housing Board in favour of the assessee, but the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. It is common knowledge, under the various schemes floated by bodies like housing boards, houses are constructed on a large scale and allotted on part payment to those who have booked. Possession is also delivered to the allottee so as to enable enjoyment of the property. Execution of documents transferring title necessarily follows if the schedule of payment is observed by the allottee. If only the allottee may default the property may revert back to the Board. That is a matter only between the Housing Board and the allottee. No third person intervenes. The part payments made by allottee are with the intention of acquiring title. Execution of documents transferring title necessarily follows if the schedule of payment is observed by the allottee. If only the allottee may default the property may revert back to the Board. That is a matter only between the Housing Board and the allottee. No third person intervenes. The part payments made by allottee are with the intention of acquiring title. The delivery of possession by the Housing Board to the allottee is also a step towards conferring ownership. Documentation is delayed only with the idea of compelling the allottee to observe the schedule of payment." 10. The Tribunal on the contrary has relied upon another judgment of the Supreme Court in the case of Divisional Level Committee and another Vs. Harswarup Drum Udyog 1999 U.P.T.C. 217 (SC) which was a case under Section 4-A(5) of the Act wherein when the Supreme Court referred to the facts of that case and held that the lease deed was executed on 27.3.1990 and therefore the respondents Unit will be entitled to exemption for a period of 3 years one month and four days from 27.3.1990. The judgment in the case of Harswarup Drum Udyog (supra) has also been relied upon by Shri Sanjeev Shankdhar, learned Addl. Chief Standing Counsel in support of his submissions and was also relied upon by the Tribunal. 11. However, in the case of Harswarup Drum Udyog (supra) it has not come on the record anywhere that the Unit had entered into possession of the property which was the subject matter of lease deed whereas in the case of Mysore Minerals Ltd. (supra) the facts are quite similar to those of the present case namely that the assessee in that case had infact entered into possession of the houses in question the same being allotted to the assessee by the Housing Board, part payment received. The assessee was a private limited Company purchased seven low income group houses from the Housing Board for the use of its staff and also made payment and the allotment of the houses was followed by the delivery of the possession of the Housing Board. 12. In the present case, the revisionist which is a private limited Company engaged in the manufacture and sale of Diesel, Engines, Generating Sets, Alternators etc, had purchased the land and building for establishing a new unit through registered agreement to sale. 12. In the present case, the revisionist which is a private limited Company engaged in the manufacture and sale of Diesel, Engines, Generating Sets, Alternators etc, had purchased the land and building for establishing a new unit through registered agreement to sale. Vacant possession of the land and building had been given to the revisionist on 20.10.1986 on the basis of the agreement of sale dated 20.10.1986. In this view of the matter the judgment of the Supreme Court on the question of 'ownership' in Mysore Minerals (supra) squarely applies to the present case. 13. It is further informed by both the learned counsel for the parties that against a part of the order of the Tribunal, Trade Tax Revision no. 122 of 1999 was filed by the Revenue and the said revision has been dismissed by this Court by order dated 5.9.2008. 14. In the present case also the revisionist under the registered agreement to sale had entered into possession of the land and building in question and the agreement to sale was registered on 20.10.1986 and therefore the law laid down by the Supreme Court with regard to ownership and possession in the case of Mysore Minerals (supra), in my opinion the revisionist would be entitled for the grant of exemption from 20.10.1986 to 22.12.1991. Therefore the order of the Tribunal to the contrary placing reliance upon the judgment in the case of Harswarup Drum Udyog (supra) is absolutely illegal and is accordingly set aside. 15. The revision stands allowed.