The Allahabad High Court granted relief to Bundelkhand University, the revisionist and observed that initiation of penalty proceedings under Section 8(D)(6) of UP Trade Tax Act, against Government Institution has not helped revenue, but has led to financial loss to Government.
The revision petition has been filed under Section 58 of the U.P. Value Added Tax Act, 2008 (assailing the order passed by the Commercial Tax Tribunal in Second Appeal No.26 of 2011 for the Assessment Year 2007-08.
The revisionistis an educational institution imparting education. The primary and dominant function of the revisionist is to impart education to students, which is not a business activity. According to the revisionist, it is neither a dealer or a contractor nor has appointed any contractor for execution of work contract. It is functioning under the control of the U.P. Government.
The university had got the building constructed by Government Agency called as U.P. RajkiyaNirman Nigam Ltd. For the relevant assessment year, U.P. RajkiyaNirman Nigam was subjected to the assessment and an order under Section 7 (3) of the Act of 2008 was passed by the Deputy Commissioner (Assessment), wherein a liability of Rs.6 lakhs was made against the Government Agency.
Revisionist-assessee received a notice from the Taxing Authorities under Section 8(D)(6) of the U.P. Trade Tax Act, 1948. The said notice was replied by the revisionist assessee. The Deputy Commissioner levied a penalty under Section 8(D)(6) of the Act of 1948 for Rs.34 lakhs.
The Counsel for assessee submitted that the levy of penalty under Section 8(D)(6) is discretionary and should not be levied mechanically and that that the officers of the university were not aware of the provisions of Section 8 (D)(6) and the tax has already been paid by the contractor while his assessment has been made.
The Bench comprising Justice Rohit Ranjan Agarwal observed that “Initiation of penalty proceedings under Section 8(D)(6) against a Government Institution has not helped the revenue, but such exercise has led to financial loss to the Government by unnecessary expenditure on litigation which, at any cost, should be avoided.”
The Court further noted that the revisionist had sufficiently explained in the reply furnished before the assessing authority that they were not well aware of the provisions of law which required for deduction under Section 8(D)(6). The reasons so furnished appear to be plausible, and in the absence of any malafide intention, in my opinion, penalty is not leviable.
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