Strict compliance with tax deferral conditions upheld where transfer of fixed assets to a separate subsidiary breached the agreement.

A tax deferral benefit granted under a contractual scheme was held to depend on strict compliance with the agreement's terms. The prohibition on alienating fixed assets and the requirement of prior permission for disposal were enforced literally, and transfer of those assets to a newly incorporated subsidiary was treated as a breach despite common management or family control. The separate legal identity of the subsidiary was material, and the terms of the scheme could not be rewritten in favour of the assessee. The notices, rejection order, cancellation of the benefit, and recovery proceedings were upheld.

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Issues: Whether the transfer of fixed assets to a subsidiary company violated the terms of the sales tax deferral agreement and justified cancellation of the deferral benefit and recovery proceedings.

Analysis: The deferral scheme and the agreements were to be construed according to their express terms. The prohibition against alienation of fixed assets and the requirement of prior permission for disposal had to be strictly enforced. The transfer to a newly incorporated subsidiary could not be treated as irrelevant merely because of common management or family control, since the subsidiary was a separate legal entity and the revenue implications could not be assumed away. The plea to read the scheme expansively in favour of the assessee was rejected, as the court held that contractual terms cannot be rewritten to suit one party's interpretation.

Conclusion: The transfer amounted to a breach of the agreement, and the notices and rejection order were upheld; relief was declined.

Ratio Decidendi: Where a tax deferral benefit is granted under a contractual scheme, the conditions of the agreement must be strictly complied with, and transfer of assets to a separate legal entity contrary to the agreement can validly result in cancellation of the benefit and recovery.

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