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of <h1>Supreme Court upholds tax liability under Karnataka VAT Act, allows input tax credit & deductions</h1> <h3>M/s. Ajanta Digital Lab Versus The Comml. Tax Officer (Audit) -2. 2</h3> M/s. Ajanta Digital Lab Versus The Comml. Tax Officer (Audit) -2. 2 - TMI Issues:1. Whether the petitioners are liable to pay tax under the Karnataka Value Added Tax Act, 2003 for their business activitiesRs.2. Whether the Assessing Authority considered the input tax credit and deductions claimed by the petitioners in accordance with the law during the assessment proceedingsRs.Analysis:1. The petitioners, engaged in the business of processing and supplying photographs, contended that they were not liable to pay tax under the KVAT Act, 2003 as they provided a service with goods used incidentally. A Division Bench judgment favored the assessees, but the Supreme Court reversed it, upholding the constitutionality of Entry 25 for tax imposition. The petitioners accepted the output tax liability but sought consideration for input tax credit and deductions. The Revenue argued that the input tax credit claims should have been raised during assessment and cannot be considered now. The court held that while the output tax is valid, the Assessing Authority must determine the net tax liability afresh, allowing the petitioners to claim input tax credit and deductions in accordance with the law.2. The court acknowledged that the petitioners' claims for input tax credit and deductions were not raised during assessment due to their earlier stance of non-liability for tax. However, the court emphasized that the petitioners should not be precluded from making such claims now if admissible under the law. As the Assessing Authority did not consider these claims in the impugned orders, the court directed a remand of the proceedings to allow the petitioners to present evidence for their claims. The Assessing Authority was instructed to pass fresh assessment orders within six months, considering the claims of the petitioners on merits and in accordance with the law.This detailed analysis of the judgment highlights the issues of tax liability under the KVAT Act, 2003 and the Assessing Authority's obligation to consider input tax credit and deductions claimed by the petitioners, providing a comprehensive understanding of the legal proceedings and the court's decision.
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