Tax paid includes set-off under Bombay Sales Tax law, resolving concealment presumption in favour of assessees.

For the explanation to section 36(2)(c) of the Bombay Sales Tax Act, 1959, the expression "tax paid" was held to include not only tax remitted to the Government treasury but also tax allowed by way of set-off under the Bombay Sales Tax Rules, 1959. The scheme of assessment and return forms treated set-off as part of the tax computation, and Rule 43 read with sections 42 and 46 showed that tax collected by the selling dealer and credited through set-off was tax in substance. Because the provision raised a presumption of concealment and ambiguity in a penal provision must be construed in favour of the assessee, the question was answered for the assessees.

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Issues: Whether, for the purpose of the explanation to section 36(2)(c) of the Bombay Sales Tax Act, 1959, the expression "tax paid" includes not only the amount paid into the Government treasury but also the amount allowed by way of set-off under the Bombay Sales Tax Rules, 1959.

Analysis: The explanation to section 36(2)(c) raises a presumption of concealment where the tax paid for the year is less than eighty per cent of the tax assessed. The form of assessment under the Rules showed that the assessed tax was the total tax found payable before deduction of set-off, but the statutory scheme treated set-off as part of the tax mechanism. The return and assessment forms required set-off to be deducted while computing the net tax payable, and the set-off rules themselves were framed on the footing that tax recovered by the selling dealer represented tax payable under the Act. Rule 43, read with sections 42 and 46, showed that the amount collected by the vendor and allowed as set-off was treated as tax in substance. The Court also relied on the interpretive principle that, if ambiguity exists in a penal provision, the construction favourable to the assessee must prevail.

Conclusion: The expression "tax paid" in the explanation to section 36(2)(c) includes the amount allowed by way of set-off, and the question was answered in favour of the assessees.

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