2015 (1) TMI 502 - HC - VAT and Sales Tax

Court Upholds Penalty for Tax Non-Deduction Despite Exemption Claim

The High Court condoned the delay in filing applications and allowed them. The revisionist, a Government Corporation providing transport services, ... Liability to deduct TDS @ 4% - Held that:- The Tribunal while rejecting the contentions of the revisionist rightly imposed the penalty to a sum representing 20% of the amount, which should have been deducted at source – revisionist contended that it is not exigible to tax being a statutory corporation and, in fact, there was a proposal, which emanated from the revisionist, which was pending before the State Government seeking exemption from payment of tax - the revisionist Corporation is a corporation, which is constituted under the State Act - even going by the revisionist, revisionist sought exemption from tax, which itself would show that it could not have been the revisionist’s understanding that it still stood exempted from the obligation to follow the provisions of Section 35 and deduct tax as provided therein - the revisionist has been granted considerable relief in the matter of quantum by the Tribunal – as such no substantial question of law arises for consideration - Decided against revisionist. Issues:Challenge to order passed by Tribunal regarding tax deduction at source and penalty imposition.Analysis:The High Court heard arguments on delay condonation applications and decided to condone the delay, allowing the applications. The revision petitions were disposed of collectively in a common order. The revisionist, a Government Corporation providing transport services, challenged a Tribunal order related to tax deduction on payments made to vehicle owners. The controversy centered around the revisionist's liability to deduct tax at source at a rate of 4%. Despite seeking exemption from tax, the revisionist did not deduct tax, leading to penalty imposition. The First Appellate Authority reduced the penalty amount, which was further modified by the Tribunal to 20% of the tax amount that should have been deducted. The revisionist contested this decision, arguing against the penalty imposition. The Court noted that no substantial question of law was framed and found no grounds to interfere with the Tribunal's decision, ultimately dismissing the revisions.The Court referred to Section 35 of the Uttarakhand Value Added Tax Act, which mandates tax deduction at source in certain cases, including when the lessee is a government entity or corporation. The revisionist Corporation, being constituted under a State Act, fell under this provision's purview. Despite seeking tax exemption, the revisionist's actions indicated an understanding of the obligation to deduct tax at source. The Tribunal had already granted significant relief to the revisionist in terms of penalty amount. Therefore, the Court concluded that there was no substantial legal question in the revisions and upheld the Tribunal's decision, dismissing the revisions.