VENKATESHWARA ENGINEERING WORKS Vs. ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES

JUDGEMENT

(1.) THE appellant is a partnership firm engaged in the business of diesel generating sets. It is registered as a dealer under the provisions of the Karnataka Sales Tax Act (Act for short ). The assessee leases the diesel generating sets for hire.

(2.) THE assessee had tiled its annual returns before the assessing authority, declaring the total turnover at Rs. 9,26,410/- and had claimed exemption on the entire turnover for the assessment years 1994-95 and 1995-96.

(3.) THE assessing authority alter rejecting the returns filed by the assessee, had issued a pre-assessment notice proposing to levy tax at 5% on the rentals received for leasing diesel generating sets. In response to the pre-assessment notice, the assessee had filed its objections, and in that had specifically contended that the income derived from the leasing of Diesel Generator sets is not one of the items enumerated in the VII Schedule to the KST Act up-to 31. 3. 1996 to become liable to pay tax under Section 5-C of the Act. The assessing authority has dropped the proposal made in the pre-assessment notice following the notification No. FD43. CSL. 94 (iii) dated 30. 3. 1994 issued by the State Government in exercise of its powers under Section 8-A of the Act. However, had levied turnover tax under Section 6-B of the Act on the lease rentals received on the leasing of Diesel Generators. The operative portion of the order passed by the assessing authority reads as under: it is seen from the seventh schedule appended to Section 5-C of the KST Act 1957 that the leasing receipts received by the leasing D. G Sets is not covered specifically in the seventh schedule and hence, no tax u/s 5-C can be levied. The assessee has stated that the D. G. sets are purchased earlier to 94-95 from local registered dealers. Considering the above facts, the levy of sales tax proposed in the proposition notice under Section 5-C of the Act is dropped. However, the levy of turnover tax at 1. 25% on leasing rentals received from hiring diesel generating sets is liable to tax on turnover of Rs. 16,22,140. 00.