Land Transferred After Cut-Off Date, Applicant Not Entitled To Trade Tax Exemption Under U.P. Trade Tax Act: Allahabad High Court

The Single Bench of Justice Alok Mathur held that since the land was not transferred to the applicant before the cut-off date as prescribed under the said Exemption Notification, the applicant could not be considered as a "new unit" and hence, it was not eligible for trade tax exemption under Section 4-A.

The U.P. State Industrial Development Corporation (UPSIDC) allotted a particular land/plot under a lease agreement to the lessee- Ajay Kumar Gupta. The lessee transferred the said land via a sale agreement to the applicant M/s Bindal Smelting Pvt. Ltd. Thereafter, the UPSIDC granted permission to the lessee to transfer the said land/ plot to the applicant. Subsequently, the said land was registered in the name of the applicant with the Industries Department.

Thereafter, the applicant M/s Bindal Smelting submitted an application under Section 4-A of the U.P. Trade Tax Act, 1948 for availing exemption from payment of trade tax, as available to a newly set up industry. The said application was rejected on the ground that the applicant did not fulfil the conditions laid down in the Exemption Notification No. KA-NI-2-3867, dated 22.12.2001. After its application for review was rejected, the applicant filed an appeal before the Commercial Tax Tribunal, who dismissed the appeal. The Tribunal rejected the validity of the sale agreement, executed in favour of the applicant by the lessee without obtaining the prior consent of UPSIDS, since it was barred under the lease agreement.

Hence, the Tribunal ruled that the applicant could not be considered as a "new unit" to avail the exemption, since the given land/plot was transferred to it after the due date prescribed in the Exemption Notification dated 22.12.2001.

Against this, the applicant filed a revision petition before the Allahabad High Court.

The applicant/revisionist M/s Bindal Smelting submitted before the Court that the provisions of the Exemption Notification deserve a liberal consideration and that the said land was validly transferred to the revisionist, via a sale agreement, before the prescribed due date and hence, the revisionist fulfilled the relevant conditions at the time when it applied for exemption.

The High Court observed that the provisions under the U.P. Trade Tax Act for exemption from Sales Tax have been introduced for the purpose of increasing the production of goods and for promoting the development of industries in the State.

The Court noted that the said Exemption Notification, dated 22.12.2001, was considered by the Allahabad High Court in the case of Akross Synthetics Private Limited versus Commissioner of Trade Tax (2007), wherein the Court had ruled that only those units which fulfilled the conditions laid down in the said Exemption Notification issued under the U.P. Trade Tax Act are "new units" and are eligible for exemption under Section 4-A of the U.P. Trade Tax Act. The High Court had held that fulfilment of the conditions mentioned in the Exemption Notifications is mandatory and has to be strictly complied with.

"Considering the aforesaid judgments with regard to the manner of interpretation of the Exemption Notification, it is noticed that the Eligibility Notification lay down conditions for seeking benefit of Exemption Notification, which have to be fulfilled and are mandatory in nature and have to be strictly complied with by the dealer if he wishes to claim exemption. In case any of the conditions are not fulfilled, same would dis-entitle the dealer from being granted benefit under the said notification.", the Court said.

The Court upheld the findings of the Tribunal that the sale agreement executed in favour of the revisionist was not valid, and that the land was validly transferred only when the UPSIDC directed the same, which was beyond the prescribed due date/ cut-off date mentioned in the Exemption Notification dated 22.12.2001.

Hence, the Court ruled that the land was not transferred to the revisionist prior to the cut-off date as prescribed in the Exemption Notification dated 22.12.2001 and therefore, the applicant/revisionist was not entitled to the benefit of the Exemption Notification.

"It is also noticed that one of the condition required for grant of exemption was that the unit should be registered with the Industries Department and both the plots were jointly registered with the Industries Department on 21.03.2001, which is clearly beyond 31.03.2000, which is cut-off date, and consequently for all the aforesaid reasons, it is noted that revisionist did not fulfil the conditions before the cut-off date fixed and hence is not entitled for exemption.", the Court said.

Thus, the revision petition was dismissed by the Court.

Case Title: M/s Bindal Smelting Pvt. Ltd. versus Commissioner of Trade Tax, Lucknow

Dated: 04.07.2022 (Allahabad High Court)

Counsel for the Revisionist: P. Agrawal

Council for the Respondent: C.S.C.

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