Assessee Paying Tax at Compounded Rate can Claim ITC for Purchases made from Beginning of the year when TO Exceeds 50 Lakhs: Madras HC [Read Order]

The Madras High Court recently ruled that the Assessee, who was paying tax at compounded rate can claim Input tax credit for the purchases made from the beginning of the year when its turnover exceeds 50 Lakhs in the middle of the year.

The assessee/petitioner, who is a registered dealer on the file of the respondent under the provisions of the Tamil Nadu Value Added Tax Act, 2006 received a notice from the department stating that the petitioner filed form K return for the year 2007-08, up to December 2007, when the turnover was Rs.49,86,142/-. Subsequently for the next three months the petitioner filed Form I returns for Rs.10,04,720/-.

The respondent has verified the Form I returns applying Section 3(4)(b) of the TNVAT Act, and granted the benefit of input tax credit for a period of 90 days and directed the petitioner to remit the balance value added tax of Rs.3,32,294/-, along with penalty at 11.4%.

The petitioner had no opportunity to put forth his objections; such demand has been straightaway issued without any show cause notice and when the petitioner filed revised return, the said provision was not available in the TNVAT Act. This is one more reason to hold that the impugned notice is bad in law.

JusticeT.S.Sivagnanam ruled that the assessee was entitled to avail benefit of input tax credit, once the turnover exceeds Rs.50,00,000/- limit.

The Court also took note of a circular issued by the Commissioner dated 29.08.2016, wherein it is clarified that if the turnover of the assessee exceeds Rs.50,00,000/- in the middle of the year, then the assessee would not be assessed at the compounded rate of tax under Section 3(4) of the TNVAT Act and he has to pay higher rate of tax and eligible for input tax credit for the purchases made from the beginning of the year.