Case Note & Summary
The petitioner, M/s. Hindustan Unilever Ltd., filed revision petitions under Section 65(1) of the Karnataka Value Added Tax Act, 2003 (KVAT Act) against the judgment and order dated 05.07.2013 passed by the Karnataka Appellate Tribunal, Bengaluru, in STA Nos.2473 to 2484/2011, which partly allowed the appeals. The lead matter was STRP No.1/2014, with STRP Nos.79-89/2015 covering different assessment periods. The assessee raised two substantial questions of law: first, whether the Appellate Tribunal was justified in holding that the assessee could not compute input tax credit on the basis of its books of account and in accordance with Sections 11, 14 and 17 of the KVAT Act and ought to resort only to Rule 131(3) of the KVAT Rules; and second, whether the Tribunal was justified in holding that the assessee was not entitled to claim rebate of input tax in respect of purchases effected by its research division when the said division was ancillary to the business of the assessee. The High Court, after hearing both sides, allowed the revision petitions, setting aside the Tribunal's order and restoring the order of the first appellate authority. The court held that the assessee is entitled to compute input tax credit on the basis of its books of account and in accordance with Sections 11, 14 and 17 of the KVAT Act, and is also entitled to claim input tax credit in respect of purchases by its research division, as it was ancillary to the business. The judgment was delivered by a Division Bench comprising Justice Jayant Patel and Justice S. Sujatha on 26th February 2016.
Headnote
A) VAT - Input Tax Credit - Computation on Books of Account - Sections 11, 14, 17 of Karnataka Value Added Tax Act, 2003 - The assessee challenged the Tribunal's order that restricted ITC computation to Rule 131(3) instead of books of account. The High Court held that the assessee is entitled to compute ITC on the basis of its books of account and in accordance with the statutory provisions, and the Tribunal erred in limiting the method to Rule 131(3) (Paras 2-5). B) VAT - Input Tax Credit - Research Division Purchases - Sections 11, 14, 17 of Karnataka Value Added Tax Act, 2003 - The assessee claimed rebate on purchases by its research division, which was ancillary to its business. The High Court held that the assessee is entitled to claim input tax credit in respect of such purchases, as the research division was ancillary to the business (Paras 2-5).
Issue of Consideration
Whether the Appellate Tribunal was justified in holding that the assessee could not compute input tax credit on the basis of its books of account and in accordance with Sections 11, 14 and 17 of the KVAT Act and ought to resort only to Rule 131(3) of the Rules; and whether the assessee was entitled to claim rebate of input tax in respect of purchases effected by its research division when the said division was ancillary to the business of the assessee.
Final Decision
The revision petitions are allowed. The order of the Appellate Tribunal is set aside and the order of the first appellate authority is restored. The assessee is entitled to compute input tax credit on the basis of its books of account and in accordance with Sections 11, 14 and 17 of the KVAT Act, and is also entitled to claim input tax credit in respect of purchases by its research division.
Law Points
- Input tax credit computation on books of account
- Rebate on purchases by ancillary research division
- Rule 131(3) of KVAT Rules
- Sections 11
- 14
- 17 of KVAT Act
