2024 (2) TMI 869 - HC - VAT and Sales Tax

Tax assessment upheld including ayurveda income in assessable value under Kerala Tax on Luxuries Act

Kerala HC dismissed the petition challenging tax assessment under Kerala Tax on Luxuries Act. The court upheld the inclusion of Rs. 3,12,13,293 towards ... Valuation - Tax on Luxuries - inclusion of an amount towards ayurveda income after giving all deductions as per law in calculation of assessable value - HELD THAT:- The contention of the petitioner with regard to the inclusion of an amount of Rs. 3,12,13,293/- towards ayurveda income after giving all deductions as per law cannot be legally countenanced - it is based on the submissions of the assessee himself and the figures declared by the assessee that the said turnover was subjected to tax under the Kerala Tax on Luxuries Act. In the absence of any figures substantiated by the accounts maintained by the assessee, produced at any stage before the authorities below, there are no reason to doubt the correctness of the decision of the Tribunal confirming the demand of tax under the said head. Addition of miscellaneous income - HELD THAT:- During the pendency of this OP(TAX), the assessing authority passed the consequential order (Ext. P12) purportedly in compliance with the direction issued by the Tribunal in Ext. P10 order - if the petitioner has any grievance regarding the correctness of the said order of the assessing authority, to the extent it does not adhere to the directions of the Tribunal in Ext. P10 order, it is for him to agitate the same before the appellate authority, on merits. Petition dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the sum of Rs. 3,12,13,293/- declared as 'ayurveda income' (after deductions) is properly includible in the taxable turnover under the Kerala Tax on Luxuries Act. 2. Whether yoga and meditation charges are properly includible in the taxable turnover for luxury tax where no challenge to such inclusion was raised by the assessee. 3. Whether miscellaneous income of Rs. 3,18,691/- derived, according to the assessee, from sale of agricultural and waste products, falls outside the taxable turnover under Section 4(2)(e) of the Kerala Tax on Luxuries Act and whether remand for account verification was correctly directed. 4. Whether the Tribunal correctly applied the charging provision S.4(2)(e) in distinguishing excluded items (cost of medicines and professional charges) from assessable turnover and whether fresh pleas deviating from pre-assessment replies could be entertained at the appellate stage. 5. Whether the assessing authority's consequential order purportedly implementing the Tribunal's directions must be challenged by the assessee before the appellate authority if not in strict conformity with those directions. ISSUE-WISE DETAILED ANALYSIS Issue 1: Inclusion of declared ayurveda income of Rs. 3,12,13,293/- in assessable turnover Legal framework: The charging provision for luxury tax and the exclusions specified under Section 4(2)(e) govern what portions of receipts are excluded from taxable turnover; exclusions must be specifically covered by statutory language. Precedent Treatment: No prior judicial precedent was cited or relied upon in the judgment; the Court adjudicated on the basis of statutory provision and record. Interpretation and reasoning: The Tribunal found that the assessing authority had allowed specific exclusions (cost of medicines and professional charges) based on the appellant's pre-assessment reply and subjected the balance to assessment as 'Ayurvedic treatment income.' The Tribunal emphasised that the figures and admissions supplied by the assessee (including percentages of salary allocation) formed the basis of the assessment. A fresh plea at the appellate stage seeking additional exclusions (cost of preparation of medicines from herbs/country drugs) was rejected as being inconsistent with the pre-assessment reply and therefore inadmissible at that stage. The Court accepted the Tribunal's reasoning that expenses not specifically excluded under S.4(2)(e) cannot be exempted from ayurveda income and that the assessee's own declarations cannot be disregarded where no substantiating accounts were produced. Ratio vs. Obiter: Ratio - where specific exclusions under the charging provision are claimed, those exclusions must be specifically covered by the statute or substantiated by accounts; admissions/figures provided by the assessee in pre-assessment replies can be treated as the basis for assessment and cannot later be recast by fresh pleas at appellate stage. Obiter - comments on the practical effect of salary allocation percentages as indicative rather than conclusive. Conclusion: The Tribunal's confirmation of assessment of Rs. 3,12,13,293/- as ayurveda income after deductions was lawful and requires no interference in the absence of substantiating accounts or a proper statutory basis for further exclusion. Issue 2: Inclusion of yoga and meditation charges where no challenge was made Legal framework: The taxable turnover under the Kerala Tax on Luxuries Act includes receipts that are not expressly excluded by S.4(2)(e); procedural principle that issues not challenged before an authority are generally not open on later appeal. Precedent Treatment: No cited authority; the Tribunal applied the procedural principle of waiver/absence of challenge. Interpretation and reasoning: The Tribunal noted there was no challenge by the assessee to the inclusion of yoga and meditation charges in the revised assessment; therefore, the inclusion was sustained. The Court endorsed this approach, stressing that where no ground is taken against inclusion before the relevant forum, the inclusion stands. Ratio vs. Obiter: Ratio - failure to challenge inclusion of specific items before the appellate forum precludes relief against such inclusion later. Obiter - none significant. Conclusion: Inclusion of yoga and meditation charges in taxable turnover was properly sustained because the assessee did not challenge that inclusion in the proceedings below. Issue 3: Miscellaneous income of Rs. 3,18,691/- alleged to be proceeds from sale of agricultural/waste products - remand and standard of proof Legal framework: Items outside the statutory charging provision (e.g., proceeds from sale of agricultural/waste products) are not assessable to luxury tax; claimant bears onus to prove such exclusion by production of accounts/documentary evidence when directed. Precedent Treatment: No precedents cited; the Tribunal exercised fact-finding jurisdiction by remanding for verification of accounts. Interpretation and reasoning: The Tribunal accepted that if the miscellaneous income was genuinely derived from sale of agricultural and waste products, it would merit exclusion. Accordingly, the Tribunal directed a remand to the assessing authority for re-consideration on production and verification of accounts. The Court observed that a consequential order was passed by the assessing authority during pendency of the petition and held that any grievance as to non-adherence to the Tribunal's directions must be ventilated before the appellate authority on merits. Ratio vs. Obiter: Ratio - where the factual source of receipts is in dispute and exclusion under the charging statute is pleaded, a remand for account verification is appropriate; the assessee must produce accounts to substantiate the exclusion. Obiter - guidance that administrative compliance with appellate directions is subject to further challenge by ordinary appellate process. Conclusion: The remand for verification of accounts in respect of Rs. 3,18,691/- was correct; if the assessee proves the source on verification, the amount shall be deleted from assessment. Any complaint about the assessing authority's consequential order is to be pursued before the appellate authority. Issue 4: Application of Section 4(2)(e) - specificity of exclusions and inadmissibility of new pleas at appellate stage Legal framework: Exclusions under the charging provision must be grounded in the statutory text and/or substantiated by the taxpayer's accounts; procedural fairness and finality require issues to be consistently presented before authorities. Precedent Treatment: No precedent formally applied; the Tribunal and Court relied on statutory interpretation and procedural principles governing admission of plea. Interpretation and reasoning: The Tribunal held that the assessing authority correctly allowed exclusions that were specifically claimed in the pre-assessment reply (cost of medicines and professional charges) and that any new plea (e.g., cost of preparation from herbs) not raised in the pre-assessment reply could not be entertained at the appellate stage. The Court concurred, underscoring that expenses not explicitly covered by S.4(2)(e) or supported by accounts cannot be excluded from ayurveda income. Ratio vs. Obiter: Ratio - parties cannot, at appellate stages, raise pleas inconsistent with their earlier statutory replies to obtain exclusions not previously claimed; statutory exclusions must be specifically pleaded and proved. Obiter - emphasis on importance of producing substantiating accounts to rebut declared figures. Conclusion: The Tribunal properly construed S.4(2)(e) and correctly declined to entertain new pleas at the appellate stage; the assessing authority's treatment of excluded items and remaining turnover was lawful. Issue 5: Challenge to assessing authority's consequential order and available remedy Legal framework: Appellate process and remedies permit challenge to assessing authority orders that do not conform to appellate directions; aggrieved party must invoke appellate remedy. Precedent Treatment: No authority cited; the Court relied on general principles of appellate remedy and finality. Interpretation and reasoning: The Court observed that a consequential order was passed by the assessing authority during pendency and held that any grievance about non-adherence to Tribunal directions should be agitated before the appellate authority on merits. Accordingly, the petition was dismissed without prejudice to the petitioner's right to challenge the consequential assessing order through proper appellate channels. Ratio vs. Obiter: Ratio - where a assessing authority issues an order purportedly in compliance with appellate directions, any challenge to its correctness must ordinarily be pursued in the appellate forum; this Court will not preempt that remedy in the present proceedings. Obiter - none significant. Conclusion: The petition was dismissed as devoid of merit, with liberty reserved to challenge the assessing authority's consequential order before the appellate authority if it does not adhere to the Tribunal's directions.