WHETHER THE AMOUNT PAYABLE UNDER S.23 (l-A) OF

THE LAND ACQUISITION ACT IS 'INTEREST'?

(K.J. Kurian, Advocate, Kottayam)

In 2005 (1) KLT 173, State of Kerala v. Mariyamma, it is ruled that there is no question of accruing any interest on the amount of interest calculated under S.23(l-A) of the Land Acquisition Act.

The first question that is to be considered in the above matter is whether the additional benefit provided under S.23(1-A) of the Act is interest or not. In the said provision the word 'interest' is not used. The relevant portion of S.23(l-A) reads as follows, "In addition to the market value of the land, as above provided, the Court shall in every case award an amount calculated at the rate of 12 per centum per annum on such market value for the period commencing on and from the date of publication of notice under S.4 sub-s.(l) in respect of such land to the date of the award of the Collector or the date of taking possession of such land, whichever is earlier". How this amount of additional benefit can be termed as interest? This benefit is provided as consideration for the increase in the value of land from the date of S .4( 1) notification to the date of award or taking possession of the land as the case may be. The amount is not interest on the market value of the land, otherwise what prevented the legislature from using the term 'interest' in the provision. The Chamber's Twentieth Century Dictionary gives the meaning of the word 'interest' as premium paid for the use of money. That means premium for money lent or retained after it has become due. The award amount became payable on passing of the award or the date of taking possession of the land. The amount of 12% is to be paid for the period prior to the date of passing of the award or the date of taking possession of the land whichever is earlier. In this way also it can be seen that "the amount of 12% per annum on the market value of land" as provided in S.23(l-A) cannot be termed as 'interest' under any circumstance.

The Supreme Court in Sunder v. Union of India, 2001 (3) KLT 489 (SC), held that a person is entitled to the award of compensation, is also entitled to get interest on the aggregate amount including solatium. Though the main question involved in the above said Sunder's case is whether the claimant is entitled to interest on solatium, the following observation of the Supreme Court is very apposite in settling the question, "We make it clear that the compensation awarded would include not only the total sum arrived at as per sub-s.( 1) but the remaining subsections thereof as well". The "remaining sub-sections' of S.23 are 23(1-A) and 23(2) and 23(1-A) provides for the amount calculated at the rate of 12% per annum on such market value for a period commencing on and from the date of publication of the notification under S.4(l) to the date of the award or the date of taking possession of land, whichever is earlier. This will clearly show that the amount provided under S.23(l-A) is not interest and it is a component of the compensation.

Then the further question is whether the claimant is entitled to interest on the amount calculated under S.23(1-A)? The answer to the question can be found in the following observation of the Supreme Court in the above cited Sunder's case, "What the legislature intended was to make the aggregate amount under S.23 of the Act to reach the hands of the person as and when the award is passed, at any rate as soon as he is deprived of the possession of his land. Any delay in making the payment of the said sum should enable the party to have interest on the said sum until he receives the payment". The above dictum unequivocally declares that the claimant is entitled to interest on the market value of land, amount of 12% increase underS.23(l-A) and the solatium underS.23(2).

On the basis of the above position of law the ruling in 2005 (1) KLT 173 that the amount calculated under S.23(l-A) of the Land Acquisition Act is interest, is not based on sound principles of law and requires reconsideration.

Children -- The Neglected Lot?!

(By Sathyashree Priya E, Advocate, Ernakulam)

Currently, the law governing children is the Juvenile Justice ('Care and ProtectionAct), 20001 (Recently amended and brought into force on 1.4.2001). The rationale behind this Act is to treat children under the age of 18 with special care and protection so that even the child offendors are not brought to trial with ordinary criminals or sent to police stations or jails2 (even when such children are in conflict with law). Hence the Legislature in its wisdom has provided for establishment of 'shelter homes'(S.37) and 'special homes’(S.9) even for children who have committed an offence and thus are in 'confict with law'. It is further provided that such children are not even to be termed as 'offendors' but only as 'Children in conflict with law'(S.5(2)). Needless to say children, who are not in conflict with law but are 'neglected' have to be treated even better! They are not to be put together even with children in 'conflict with law' but have to be maintained and well looked after in 'Children's Homes'(S.34) specially created for this purpose.

According to the Juvenile Justice Act 'Children in conflict with law' have to be 'tried' only by a Juvenile Justice Board(S.4) comprising of a Judicial Magistrate of First Class who has special knowledge or training in child psychology or child welfare, two social workers of whom at least one is a women. The basic premise being that children are not to be treated like ordinary criminals and shall not be brought to trial in the regular Magistrate's Court. So also, 'custody' of neglected children have to be decided only by a Child Welfare Committee (S.29) consisting of a Chair Person and four other members of whom at least one shall be a woman and another an expert on matters concerning children. This committee shall have the final authority to dispose of cases for the care, protection, treatment, development and rehabilitation of the children as well as to provide for their basic needs and protection of human rights. One of the salient features of this Act worth mentioning is that any child in need of care and protection may be produced before the committee by the child himself, or through childline or by any social worker or public spirited citizen (S.32). Thus the child, though a 'minor', can present himself/herself before the committee and seek justice!! A child in need of care and protection would include a child who has a parent or guardian and such parent or guardian is unfit or incapacitated to exercise control over the child! (S.2(d)(iv)) Law provides that when a child who is being or is likely to be grossly abused, tortured or exploited for the purpose of sexual abuse or illegal acts can seek relief under the Act by appearing before the Child Welfare Committee (S.2(d)(vi).

Though the Act was passed in the year 2000, it is a shame that even after a lapse of 5 years, till this date neither the Juvenile Justice Board nor the Child Welfare Committee has been constituted in the State of Kerala. The children are a neglected lot. Even presuming that such neglected children constitute 1% of the population of the State of Kerala there could be at least 2000 such neglected children in this State alone. This is only a presumption. Actual figures may even be higher. Fortunately or unfortunately children are not capable of asserting their rights by forming into groups. They are quite vulnerable!

Of what use is a letter of law if it is not followed in spirit!! Similarly the Act provides for establishment of 'Children's Homes' and Shelter Homes' for maintaining neglected children and ‘Special Homes', 'Special schools' for children in conflict with law'. The law goes one step further to provide for observation homes (S.8) to place the under trials (Children in conflict with law) so that proper treatment is meted out to them pursuant to their age. These laws have been passed based on the hypothesis that children are to be given a different treatment from that of hard core criminals and also to reform these young children at an early age in life.

More than two decades back Justice Subramanian Potti has chided this callous, indifferent and thick skinned attitude of the Government in neglecting children (1982 KLT 915). Of course the judgment referred to the provisions of the Children's Act which was then in force. Most of the provisions of this Act have been clubbed together with the Juvenile Justice Act, 1986 and a new Act Juvenile Justice Care and Protection Act, 2000 has been passed. S.60 of the Act specifically provides that

"The competent authority which makes an order for sending a juvenile or the child to a children's home or to special home of placing the juvenile under the care of a fit person or fit institution may make an order requiring the parent or other person liable to maintain the juvenile or the child to contribute to his maintenance, if able to do so, in the prescribed manner according to income".

This is based on the statutory liability that the primary responsibility of taking care of the infants is on that of the Parents. In fact R.72 of the repealed Children's Act went a step ahead and stated that 'If the parent or such other person fails to remit the amount in each month the defaulted amount shall be recoverable under the Revenue Recovery Act as if it is an arrear of revenue and the Court can order for the discharge. The absence of such a rule in the Juvenile Justice Care and Protection Act, 2000 imposes a heavier burden on the State! Several stringent provisions relating to parents found in the Children's Act (now repealed) are conspicuously absent in the Juvenile Justice Care and Protection Act, 2000. For example. Section 41 of the Children's Act prescribes that if a parent or any other person whomsoever, having the actual charge of, or control over a child, assaults, abandons, exposes or wilfully neglects the child or causes or procures him to be assaulted, abandoned, exposed or neglected in a manner likely to cause such child unnecessary mental and physical suffering, shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both. The Juvenile Justice Act focuses more on the victims i.e. the children rather than dealing with the offendors!! Thus it is infact a soft law!

The State as 'Parens Patriae' has to step into the shoes of the parents if the parents fail in their primary responsibility because 'it is the principle that the State must take care of those who cannot take care of themselves, such as minors who lack proper care and custody from their parents. It is a duty, a secondary responsibility and not an imperfect obligation. However, State shall realise the maintenance costs from the parents proportionate to their income.

192 Countries have been parties to the Child Rights Convention3 (excepting the U.S.A. and Somalia). The United States of America, the so called developed nation, imposes capital punishments even on children under 18. Former Attorney General Shri Soli Sorabjee4 strongly condemns this attitude of the U.S. and welcomes the recent U.S. Supreme Court landmark judgment which has declared this practice as unconstitutional. As a result of the judgment death sentences imposed on 72 Juveniles for the Commission of murder are wiped out.

Let us resolve to act in a more civilized manner! Neglecting the needs of children results in regression than Progress! The Government concerned shall positively take steps to establish the Juvenile Justice Board and the Child Welfare Committee at least to show that it cares and is better civilized!!

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Foot Notes

1. An Act to consolidate and amend the law relating to juvenile in conflict with law and children in need of care and protection, by providing for proper care, protection and treatment by catering to their development needs, and by adopting a child-friendly approach in the adjudication and disposition of matters in the best interest of children and for their ultimate rehabilitation through various institutions established under enactment.

2. Formerly the Children's Act was in force which had special provisions for children. Pursuant to this Central Act all the States had framed their Acts and Rules in detail. This Children's Act has been repealed in 1986 when Juvenile Justice Act, 1986 came into force. This Act was further modified and now the Juvenile Justice (Care and Protection) Act, 2000 has been enacted.

3. The General Assembly of the UN has adopted the Convention on the Rights of the Child on the 20th November, 1989. The Government of India has ratified the convention on the 11th December, 1992.

4. In his ‘Soliloquies’ published in the Indian Express dated 13^th March, 2005. He further goes to say in this that “Critics argue that there is striking evidence that criminal gangs in America’s Cities are already employing 15,16,17 year old assassins to commit the gang’s murders in those States that don’t execute juveniles. What is overlooked by the critics is that although all 72 persons on death row for murders they had committed when they were 16 or 17 are spared their lives, they will instead receive the harshest punishment available, namely spending the rest of their lives in prison.

‘VAT’ – LAW AND IMPLICATIONS

(By K.P. Pradeep, Advocate, High court of Kerala)

The French born value Added Tax System, in 1954, is much popular around more than 160 countries in all over the world. Its roots could be traced to the writings of F Von Siemens, who proposed it as a substitute for then newly introduced German Turnover Tax, in 1918.

Two significant features of progressive taxation systems are economic efficiency and transparency. A transparent tax system shows the correct incidence of tax and thus serves the objectives of equity of the tax. VAT assures the transparency and the transparency in the incidents of tax causes its popularity along with other features of taxonomy and administrative expediency.

Value Added Tax is an indirect tax on consumption. VAT is multi-stage tax levied as a proportion of the value added (i.e., sales minus purchases which is equivalent to wages plus interest plus rent plus profits) It contemplates rebating tam paid on inputs/(capital goods) and on account of this, it does not have any cascading effect. On account of the rebating system, which requires maintenance of accounts of tax paid on purchases and sales it has got a self-policing effect that may reduce the scope for tax evasion/avoidance. It is collected at each stage of the distribution process, and in principle, its burden falls on the final consumer.

The Indian scenario on VAT legislation stated recently, only in the late nineties of twentieth century. In 1995 a Committee of States’ Finance Ministers mooted the magnitude of VAT, which again came for much deliberation in 1998. The Committee of Chief Minister, in 1999 has put forth its proposals to replace the present sales tax by VAT In a conference of the Chief Ministers and Finance Ministers held on November 16, 1999, the need for an immediate VAT legislation was set out. That led the formation of a Central Empowered Committee of Finance Ministers of the3 States constituted by the Ministry of Finance, Government of India. The committee was convened under the leadership of Mr. Asim Kumar Dasgupta, the Finance Minister of West Bengal. Several State Legislatures drafted and enacted the VAT legislation. But lack of uniformity in the legislation belated its implementation. The Central Empowered Committee at last decided to implement the VAT throughout the nation from 1.4.2005 as declared in its white paper published on 17^th January, 2005.

The Kerala Legislative Assembly enacted the Kerala Value Added Tax Act, 2003 in parity with the national policy, subject to corrections and acquired assent form the President on 10^th December, 2004. The Kerala VAT Act, 2003 came into force as on 1st April 2005. However, the Act is in contravention with the National Policy declared in white paper, in certain extent.

The VAT system replaces the so long commodity taxation system by making taxation on value addition. The rate of taxation based on the commodities, dropped by a multiple rate of taxation of 1%, 4% and a residuary rate of 12.5% in all points according to the importance of goods. In Kerala, the goods like liquors, petroleum products will suffer a higher rate of tax at its single point sale under the Kerala General Sales Tax Act, 1963.

The VAT replaces disadvantage of commodity taxation in certain aspects. The existing scheme of commodity taxation with single point levy is based on the value addition only at the level of the first seller/manufacturer or the importers. The tax evasion at a particular point causes loss of State revenue in toto with respect to the concerned transaction. VAT enables levy in the subsequent level, which will prevent tax evasion at a greater extent.

In principle, the VAT replaces the existing multiple taxation on trade by a Single taxation system. The Task Force on Indirect Taxes with Mr. Vijay L. Kelkar as Chairman has submitted the Consultation Paper on 25th October, 2002 by recommendation of unification of state trade taxes, i.e., Sales Tax, Purchase Tax, Turnover Tax, Works Contract Tax, Entry Tax, Special Additional Tax, etc. The Task Force strongly recommended that VAT should be one tax to replace all taxes on goods and services. The removal of multiplicity of states taxes follows a zero rated tax on export and inter State sales. However, the Empowered Committee ratified the implementation of entry tax in vatable mode. The purchase tax is retained in VAT also, by enforcing payment of tax on the occasion of purchases from unregistered dealer.

In VAT, the incidence of tax is in all point and it will remove the difficulty in identification of the exact incidence of tax. The tax component in any transaction is easily identifiable/computable, thus helping analysis of tax effect on various options of investments/economic choices of producers or consumers.

The expectation is that the wide spread taxation of inputs at every point of sale will encourage the industries to go in for in-house production of their requirements rather out sourcing, which may help the local industries. Though in VAT system in Kerala, the Kudumbasree and Khadi and Village Industries having annual turnover up to 25 lakhs are exempted from levy of tax, the Small Scale Sector is burdened with normal levy of tax. While the Empowered Committee permitted to continue the State incentives, as per the whims of the State, the Kerala Legislature come with a deferment scheme of taxation coupled with 5 years loan in case of small scale industries.

Under VAT, the administration of tax may be much effective than the sales tax system. In the later system, the collection of the major portion of taxes is at the first stage of sale and the concentration of administration is on small number dealers: manufacturers/first sellers in respect of imported goods. A large number of dealers who trade in these commodities in the subsequent levels of distribution get ignored, resulting in evasion too. VAT enables taxing of all dealers liable to be registered under the Act.

The mode of self-assessment replaces the compulsory assessment at the end of each assessment year. The self-assessment is based on the periodical return filed by the dealer. The mandate of statutory compulsory auditing and requirement of submission of audit certificate by the qualified practitioners on turnover limit of 25-40 lakhs and by Chartered Accountant more than `40 lakhs are other features. The dealers are subject to departmental audit, which will check the correctness of self-assessment.

The credit-invoice scheme is one of the main benefits of VAT. It provides an audit trail that makes tax administration easier and supports voluntary compliance with the tax. Documentation by way of issuance of tax invoice, cash memo or bills keeping serially dated, numbered and authenticated counterfoils and periodical filing of returns enables proper policing of collection of tax.

The dropping of multiplicity of rates, according to the nature of commodities will minimize the disputes in the fields of "manufacture" and classification of goods. The major inefficiency of the present taxation system is the multiplicity of rate of tax and the frequent changes in rate of tax according to the whims and fancies of the tax administration.

The system of recording data of entry and exit of goods through border check posts provides some information on inter State sales, consignment transfers, or imports. However the consumption of a commodity sourced from local production is not easily ascertainable. Under VAT, the tax officers are to be well informed on the quantum of tax mobilized on inputs or intermediaries, the likely tax credit or refund claims etc. It shall also be equipped to anticipate the tax receipts at later stages of the value chain of a commodity from an already determined input-output ratio. In VAT, a set off is given for input tax as well as tax paid on previous purchases. If the tax credited exceeds the tax payable on sales, the excess credit will be carriedover. However, the set off is subject to the criteria fixed by the Act.

The dealer having annual turnover upto `50 lakhs is eligible to opt for composition with payment of a percentage of tax, currently 1/2 percent on the gross turnover, called presumptive tax. However, no input credit is available on making such option. The Dealers opting payment of presumptive tax shall not collect tax on sales. Purchases from a presumptive tax dealer is not eligible to input tax credit.

The composition with respect to works contract is retained with some minor changes. Dealers in producing granite metals, Dealers in cooked food and beverages and Video Cassette, CD vendors are other groups eligible for composition. The works contractors other than importers or effecting the first taxable sales in the State is eligible for 2% composition and otherexcluding certain dealers engaged in installation and electrical contracts etc. are eligiblefor 4% composition. The monetary limits of rupees five lakhs and rupees ten lakhs are the major changes, with regard to the registrability and taxability, respectively. Under the former Sales Tax System, the monetary limits were rupees one lakhs and two lakhs respectively.

The time invites some changes. The traditional views may not apt for the current needs. The unification of Appellate and Revisional Authorities is the area needs consideration. The Appellate Authority in the assessment level and the revisional authorities in the other levels are the two different level and the revisional authorities in the other levels are the two different level quasi-judicial authorities under the Act. Such kind of classification is irrelevant considering the nature of works entrusted to them. Both authorities are quasi-judicial functionaries require independence from departmental obedience. However, in practice such authorities lack independence on the fear of departmental transfer or other actions on displeasure.

In the place of statutory appeals and revision the disputes may be brought before the independent arbitrator or such number of arbitrators appointed by the head of the State to avoid departmental bias and to assure proper administration of justice. An award of arbitrator may be subjected to the scrutiny of a pure judicial body.

Of course, Flexibility, Simplicity and Elasticity are the significant features of workable tax system. Flexibility assures modification of tax system according to needs. Simplicity and elasticity guarantees ability to meet the contingencies by way of raising additional revenue. However finality and stability are the predominant requirements for the better performance of a tax system. The recurrent changes in the provisions and numerous and conflicting notifications followed by numberless clarifications create annoyance to the business community to a large extent. Such kind of annoyance should be avoided.

The expectations of the State, Industries, Traders and common men regarding the newborn Value Added System are more. Let the time prove its efficiency.

Taxability of 'Intangibles' Under Sales Tax

(By K.P. Pradeep, Advocate, High Court of Kerala)

The ever-large debates on tax avoidance in trade resulted the 46th Amendment to the Constitution of India, which amended the definition clause in Art.366 by the injection of C1.29A. C1.29A happen to be the part of the Constitution, right from the year 1982 widening the definition of sale irrespective of its traditional meaning approved in the Sale of Goods Act, 1930.

Even from the ancient days of our country, sale of goods by the trade community is one of the major revenue sources of the 'State'. The Parliament, with 46th Amendment to the Constitution, had sheltered the State's interest in revenue enhancement, by way of expanding the ambit of "sale", which was hardly curtailed in the celebrated decision of the Apex Court in Gannon Dunkerly Case ((1958) 9 STC 353 (SC).

Nevertheless a mere Constitutional guarantee could not resolve the problems of tax avoidance. The issues again appear for discussions, when the trade community tries to avoid the tax on transactions of intangible property and benefits, stating that these intangible properties and benefits does not appear the features of the "goods" as defined or under common parlance. The term goods defined in the Constitution as "goods" includes all materials, commodities and articles (Art. 366 (12) of the Constitution of India). In its wider meaning the goods are described as everything that is capable of ownership1. As well, anything, material or immaterial, which can satisfy the human needs, is treated as goods in economic parlance2.

Goods or commodity is interchangeable terms denote an article of trade, a movable article of value, something that can buy and sell3. A sale of movable property is subject to taxation if the property is transferred from the seller to buyer in the course of trade or business for cash or deferred payment or for other valuable consideration. It denotes every transfer of movable property is an incident of taxation under Sates Tax or Value Added Tax. Further it was explained that properties, which are capable of being abstracted, consumed and used, transmitted, transferred, delivered, stored or possessed, are goods for the purpose of sales tax4.

The property is defined as 'things and rights considered as having a money value'5. The extended meaning of the term 'property' is that 'every species of valuable right and interest'. It includes everything that subject to ownership6 and has an exchangeable value or which goes to make up wealth or estate irrespective of its nature that corporeal or incorporeal, tangible or intangible, visible or invisible or real or personal7.

The property in its larger import signifies things and rights as having money value, especially with reference to transfer or succession, which includes the rights such as trademarks and patents and other rights in rem8. An incorporeal right of copy right, intangible thing of electric energy9 and a mere chance for a prize or a right and beneficial interest to participate in a draw10 are treated as property of which its transfer is exigible to the levy of tax under respective sales tax statutes.

Yet, an interesting aspect is that whether the gas or steam is tangible or intangible property. Of course the gas supplied in the containers or cylinders is an article of merchandise subject to taxation, however cannot be considered as tangible property in its real form. However, steam is held to be as tangible property subject to levy of sales tax, as 'it is visible and it has weight and it can be felt at any rate to the detriment of the person venturing to feel it'11.

Differing from the above views, it was urged that transfer of technical know how will not subject to taxability12. Further, the technical know how is in the forms of drawings and designs, though for valuable consideration in the money form or not, is only constituted ideas, is an intangible property and not goods. However rejecting the above contention, the Apex Court held that at the moment the information or advice is put in media, whether paper or diskettes or in any other thing, and sold in lieu of money, the things become a chattel, exigible to tax13. The verdict is very obvious to say that the intellectual input is not free from taxation if it transferred to others in a commercial transaction by acquiring its value.

A series of instructions issued to the hardware of a computer enabling its performance, namely software, is nothing but an intangible thing, but certainly sold to the customers, housed in a tangible media such as floppy disk or CD ROM. Such encoded instructions and designed programs are perfectly goods14. Apparently an intellectual property when it is put on a media becomes goods.

In the strict interpretation of taxing statutes, the tangibility or intangibility of a thing is not a relevant criterion for the purpose of levying tax on the transaction of such things. In the taxing statutes of our country, the test to determine a property as 'goods' for purposes of sales tax is not whether the property is tangible or intangible or incorporeal15. The Apex Court invented the test is whether the thing is capable of abstraction, consumption and use and whether it can be transmitted, transferred, delivered, stored or possessed16 irrespective of its tangibility or intangibility.

When the cases on the subject of the sale element in mobile services and supply of SIM cards to the customers came up for consideration, the large stress was on the contention that passing of intangible benefit cannot be treated as sale but only services17. Though the supply of prepaid SIM cards is held as sale, the transfer of facilities and intangible right to use the wireless routes for the post paid customers are untouched by the Courts. If the capability test invented by the Apex Court is functional, the transfer of right to use the mobile route by the post-paid customers, though it is intangible property of the mobile service providers, is necessarily a sale with valuable consideration. Consequently, the transfer of right to use the cyber ways to a customer, by an Internet service provider, is nothing but a transfer of right to use an intangible benefit, amounts to sale, as maintained by the capability test.

Though the supply of branded software in corporeal forms are held to be sale, in case of unbranded software, indeed the same is an intellectual property satisfying the test of capability, but a product of service contract amenable to works contract tax. This issue is left open in the celebrated decision in Tata Consultancy18

A music composed is definitely an intellectual work by the artistry of a musician by itself is not a good for sale, on the other hand when the same is hosted in media of disc or cassette, become a readily mercantile commodity having the characteristics of property exigible to tax. A blank cassette, of course, is an article of merchandise. When an intellectual work of music is recorded in the blank cassette, a corporeal media, there is a value addition in the post recorded cassette and the value of the intangible artistry work is subjected to taxation, as held by the Apex Court in Gramaphone Co. 's case19.

Whether a license is tangible or intangible is widely discussed in various case laws particularly with reference to the replenishment license. The Court ruled out the contention that the license has no physical existence however is a bundle of fights. The Court held that the right of privileges of entitlement of any right conferred by a license is crystallised or incorporated in a physical document, hence has a corporeal existence, thus taxable as an article of merchandise20.

As a consequence, the current position is that the physical existence of property or any beneficial rights is immaterial to attract the levy of tax. It is every article of merchandise, even otherwise not excluded from the taxation, is subjected to sales tax. An article of merchandise whenever used in a taxation statute must always be understood in common parlance and must be given its popular sense, means the sense with which people are conversant and while dealing with the articles would attribute to it.21

The judicial wisdom is a matter of random transformations. In the fifties of last century the Judiciary was very keen in restraining the 'meadow of commodity taxation', with strict interpretation of terms as per the traditional trade meanings. That is why, in Rameshwar Jute Mills22, the Court without any hesitation held that the transfer of quota of 'loom hours' by members of Jute Mills Association, to other member mills is not a sale, but only transfer of abstract rights of intangible incorporeal property. However the Courts in current times is more conscience to sanctify the wider scope of tax incidence. The Legislature is also keen to elucidate the new areas to enlarge the tax revenue. Consequently, the new value added legislation has included all intangible goods23 under the purview of VAT.

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Foot Note:

1. Mohamed Kabir v. Government, 15 Deccan L.R. 60, cited in Nizam Sugar Factory Ltd. v. Commissioner of Sales Tax, 8 STC 61 at p. 67

2. Nizam Sugar Factory Ltd. v. Commissioner of Sales Tax, 8 STC 61 at p. 68

3. U.S. v. Sischo, D.C. Wash. 226 F. 1001 quoted in " Words and Phrases", Volume 7A, Permanent Edition at page 590.

4. Commissioner of Sales Tax v. Madhya Pradesh Electricity Board, (1969) 1 SCC 200

5. Vikas Sales Corporation v. Commissioner of Commercial Taxes, AIR 1996 SC 2082. 4

6. Hoffmann v. Kinealy, 389 S.W. 2d. 745

7. Labberton v. General Gas Co. of Americia, 53 Wash.2d 180.

8. See Black's Law Dictionary, 6 Edn. 1990.

9. Commissioner of Sales Tax v. Madhya Pradesh Electricity Board, (1969) 1 SCC 200, also in 25 STC 188, See County of Durham Electrical Co. v. Commissioner of Inland Revenue, (1909) 2 KB 604. See also State of Andhra Pradesh v. NTPC Ltd, (2002) 5 SCC 203.

10H. Anraj v. State of Tamil Nadu (1986) 61 STC 165. This ratio was doubted in Sunrise Associates v. Government of NCT of Delhi, (2000) 10 SCC 420 and referred to Larger Bench.

11. Nizam Sugar Factory Ltd. v. Commissioner of Sales Tax, 8 STC 61 at p. 69.

12. See the arguments in Associated Cement Companies Ltd. v. Commissioner of Customs, (2001) 4 SCC 593.

13Associated Cement Companies Ltd v. Commissioner of Customs, (2001) 4 SCC 593, para 33.

14. St. Albans City and District Council v. international Computers Ltd, (1996) 4 All. E.R. 481 at 493.

15. Tata Consultancy Services v. State of Andhra Pradesh, 2005 (1) KLT SN 13 (C.No.15) SC= (2004) 137 STC 620 at p 633.

16. Ibid.

17. Escotel Mobile Communications Ltd v. Union of India & Ors., 2002 (2) KLT SN  22 (C.No. 24)=-(2002) 10 KTR 318 (Ker.)

18Tata Consultancy Services v. State of Andhra Pradesh, 2005 (1) KLT SN 13 (C.No.15) SC= (2004) 137 STC 620 at p 633.

19. Gramaphone Co. of India Ltd v. Collector of Customs, JT 1999 (9) SC 275.

20. P.S. Apparels v. Deputy Commercial Tax Officer, 94 STC 139 (Mad.), Vikas Sales Corporation v. Commissioner of Commercial Taxes, AIR 1996 SC 2082.

21. Parle Biscuits (P) Ltd v. State of Bihar and Others, [2005] 139 STC 204 at p. 214.

22. State of Bihar v. Rameshwar Jute Mills, (1953) 4 STC 182 at p. 185 (Patna)

23. Item 3 of the Third Schedule to the Kerala Value Added Tax, 2003 covers all intangible goods like Copyright, Patent, REP License, DEPB License etc. to levy VAT at the rate of 4%.