Allahabad High Court has held that Section 4-BB of the Uttar Pradesh Trade Tax Act, 1948 (UPTT Act), which provides for set-off of tax, did not make any distinction between sales made to exempted units and taxable sales, i.e. set-off is not restricted to only those sales upon which tax was levied or collected.
The Court in this appeal filed by Maiden Industries noted that the set off claimed is of all taxes that have been paid on the purchase of raw material and that the same is not restricted in any manner to only those sales upon which tax has been levied or collected. Relying on the judgment of Supreme Court in Bharat Petroleum Corp. Ltd. [1992-VIL-05-SC], it was held that there was a clear absence of quantitative correlation to the total tax paid on raw material and their utilisation in the manufacture of taxable goods.
Further, the Court observed that Section 4-BB was in the nature of a beneficial provision and had to be accorded an interpretation in favour of the assessee.
The issue before the Court was whether the tax paid on purchase of raw material and packing material was liable to be adjusted in full from the ultimate tax liability or was it liable to be adjusted only to the extent of taxable turnover.
The assessee had paid tax on the purchase of raw material and packing material and undertook both taxable sales and sales in favour of units which had been granted exemption from payment of tax under Section 3-B of the UPTT Act. The assessing authority however reduced the set-off by the amount of tax not paid on the exempted sales undertaken by the assessee.