Compounded tax under sales tax law must include branch on a proportionate basis for the preceding year.

The first proviso to section 7(1)(a) of the Kerala General Sales Tax Act, 1963 requires the immediately preceding year's tax to be the basis for compounded tax, and that base must reflect the tax for the full year. Where a branch operated only for part of that year, the tax figure is to be computed proportionately for the period of actual . The proviso applies to business carried on both at the head office and at branches, since the provision makes no distinction between places of business. The assessee's attempt to exclude the branch from computation was rejected, and the compounding fee fixed by the assessing authority was upheld.

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Issues: Whether the first proviso to section 7(1)(a) of the Kerala General Sales Tax Act, 1963 applied to the assessee's case for fixation of compounded tax for the assessment year 2000-01, including the branch business commenced during the preceding year.

Analysis: The provision required the tax payable for the immediately preceding year to be taken as the basis for compounding, and that figure had to reflect the tax for the whole year. The Court held that where a branch functioned only for part of the previous year, the tax base had to be computed proportionately for the period during which business was actually transacted. The proviso was held applicable to business conducted both at the head office and at branches, since the text made no distinction between places of business. The assessee's attempt to exclude the branch from the computation was rejected as contrary to the scheme of section 7.

Conclusion: The first proviso to section 7(1)(a) applied to the assessee, and the compounding fee was correctly fixed by the assessing authority.

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