TaxTMI 
TaxTMI 
2018 (12) TMI 484
X X X X Extracts X X X X
X X X X Extracts X X X X
....re than one branches and the provision we are concerned with is that applicable for jewellery's. 2. The assessee filed an application for compounding in April, 2006, obviously in tune with Bill-I. However, no action was taken on the said application. Subsequently when the Act came into force, the Assessing Officer [for brevity "AO"] passed Annexure-A order, produced in both the revisions, permitting payment of tax at the compounded rate and also computing the tax payable. While computing the tax payable, the AO took note of the provisions which provided for compounding, at the rate of 200% of the highest tax payable by the assessee as conceded in the return or accounts either under Kerala Value Added Tax Act, 2003 [for brevity "KVAT Act"] or Kerala General Sales Tax Act, 1963 [for brevity "KGST Act"]; for a period of 12 months during any of the three consecutive preceding years. The AO also took note of Explanation II, which mandated that, for the purpose of compounding, each branch shall be treated as an independent place of business for the purpose of calculating the tax payable ie: the compounded tax payable. 3. Both the assessees had a principal place of business-Head Off....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee with respect to no segregation of Head Office and branch offices was possible, was not accepted. 6. Appeals were filed by the Revenue as also the assessee from the order of the first appellate authority. Obviously the appeal of the Revenue was on the question of whether the tax payable should be that conceded or that which is finally assessed. The assessee in their appeal sought for finding highest tax conceded in the return or accounts based on the consolidated return of the Head Office and branches without any segregation. The Tribunal by Annexure-D order, set aside the orders of the authorities below and remanded the matter to the assessing authority for consideration, keeping all the issues open. It is submitted by the learned Counsel for the respondent-assessee that when the matter was pending before the Tribunal, the AO had passed an order on remand dated 06.08.2009. However later, when the Tribunal passed Annexure-D dated 20.07.2010, the AO took up the assessment again, finding that the order dated 06.08.2009 is not properly passed. This was on the premise that earlier the Commissioner had directed higher tax to be determined on the basis of what is conceded in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding tax payable at 200% for each particular branch in the assessment year 2006-07. It is also contended that the words employed being 'tax payable for three preceding years', necessarily the component of tax under Section 5 and Section 5A as also Section 5D has to be included in arriving at the highest tax payable for each year. As far as the KVAT period is concerned, i.e., of 2005-06, the Circular exempts Section 6(2) tax paid and hence, the same shall not be added for computation of compounded tax. It is also argued that what has to be accepted is the tax assessed eventually or enhanced in appeal and not that conceded in the return or account. The subsequent Circular No.38/2008 though excludes computation of purchase tax for determining the highest tax for the three preceding years, the provision in the statute does not call for such exclusion. 10. The learned Counsel for the respondent-assessee would, however, contend that there were no separate returns filed for the branches or the Head Office in the preceding three years and the intention behind Section 8(f)(i) is to have a determination of the consolidated tax payable in each of the three preceding years. The compou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d opened any new branch subsequent to 31st day of March, 2005, then the additional compounded tax payable with respect to any such branch shall be the average of the tax paid or payable by him in respect his principal place of business and all branches, as if such new branch had not been opened: Provided no additional tax is payable by a dealer covered by clause (ii) for the new branches opened during the year 2005-06. (iv) Notwithstanding anything contained elsewhere where a dealer commences business during the period from 1st day of April, 2006 to 30th day of September, 2006 may at his option, instead of paying tax in respect of such goods in accordance with the provisions of section 6, pay tax at compounded rate per month from the commencement of the business at one hundred and fifty per cent of the average monthly tax paid or payable from the commencement of business to 30th day of September, 2006 under this Act : Provided further that where a dealer had paid tax under clause (f) and opts for payment of tax under the clause for the succeeding year, the compounded tax payable for the succeeding year to which such option relates shall be at one hundred and fifteen per ce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by such dealers for 2006-07 will be calculated as follows: (i) At 200% of the highest tax payable for a period of twelve months during any of the years 2003-04, 2004-05 or 2005-06. (ii) At 400% of the tax payable or paid for the year 2005-06 in the case of dealers who do not qualify for compounding as per sub-clause (i) of clause (f) of section 8. (iii) In the case of a dealer commencing business during the period from 1.4.2006 to 30.9.2006, the compounded tax per month shall be at 150% of the average monthly tax paid or payable from the commencement of business till 30.9.2006. (iv) In the case of a "branch" opened by a dealer after 31.3.2005, who has opted to pay tax as in item (i) and (ii) above, the tax payable for the new branch will be worked out as in sub-clause (I) and (ii) based on the figures used for computing the tax liability, taking the average of the tax paid or payable for the principal place of business and other branches, as if the new branch had not been opened. 6. Branches are treated as independent units for the purpose of compounding. So if need be, dealers are at liberty to opt out of compounding in respect of any branch and compounded for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 14. Circular No.42/2006 also is in tandem with the provision. Based on the time in which the new branch was opened, there is a further provision made under sub-clause (iv) of Section 8(f). All these would together indicate that the specific intention of the legislature was to provide for compounded tax, taking the separate tax paid by each of the branches and computing the compounded tax for that particular branch on the basis of the highest tax conceded by it in the returns or accounts in the last three preceding years. We, hence, answer question No.(i) against the assessee and in favour of the Revenue. 15. The next question is whether the computation has to be made on the basis of the tax conceded in the returns or accounts or that determined in assessment. The words employed in the provision being very clear, we are in perfect agreement with the judgment of the other Division Bench in M/s.Malabar Ornaments (P) Ltd. We, hence, answer question No. (ii) in favour of the assessee and against the Revenue. 16. On the question of non-inclusion of purchase tax under Section 5A and additional sales tax under Section5D, of the KGST regime, we are of the opinion that the compounding p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hree years. However, in the case of the assessees having opted for compounding the tax payable in either of the years under the KGST Act, even if there was additional sales tax levied and paid on the basis of the legal position as it existed then by reason of the judgment of the High Court, the same would not be includable for determining the highest tax payable for reason of the Supreme Court in Bhima Jewellery having categorically found that there should be no additional sales tax on the compounded tax payable. If either of the assessees had in either of the years, paid tax in accordance with Sections 5 and 5A, then alone the additional sales tax payable would be included for determining the highest tax payable. Question No.(iv), hence, is answered partly in favour of the assessee and partly in favour of the Revenue. 19. In the above circumstances, we modify the order of the Tribunal and the first appellate authority to the effect of the following directions: In computing the compounded tax payable, the Head Office and each branches would be considered independently and highest tax payable would be taken separately as conceded in the returns or accounts. The tax assessed or modi....