Monday, September 18, 2017

Should Air India Pay Sales Tax For Sale Of Rejected Aircrafts And Scrap Parts? Delhi HC Refers Question To Larger Bench

The Delhi High Court recently referred to a larger Bench the question: “Whether the sale of unserviceable (rejected) aircraft and unserviceable stores, scrap and spare parts by the Petitioner (Air India) are amenable to Sales Tax under the provisions of the Delhi Sales Tax Act, 1975?” The Bench comprising Justice S. Muralidhar and Justice Pratibha M. Singh opined that the judgment in the case of Commissioner of Sales Tax v. DTC, 1996 III AD (Delhi) 462 needed reconsideration. The Court had in that case held that the sale of scrap by Delhi Transport Corporation (DTC) would not be amenable to sales tax, holding that the activity could not be said to be independent and unconnected with the main activities of the Corporation....
The Court was hearing a batch of Appeals filed by Air India, demanding a clarification on the need for payment of sales tax on sale of scrap, depleted parts and out-dated or unused aircrafts under the Act. In the same vein, another question posed before the Court was whether Air India was a ‘dealer’ which is ‘carrying on business of selling goods in Delhi’ in respect of the scrap. The Court noted that the cases cited before it dealt with different modes of transportation, namely, road, rail and air. “In respect of Railways, the consistent view of the Supreme Court as well as the laws of Bombay and Madhya Pradesh is that the Railways is amenable to tax on the sale of spares, scrap etc. The DTC (supra) decision of this Court takes a contrary view in respect of road transport following the decision of the Andhra Pradesh High Court while disagreeing with the views of the High Courts of Madras and Madhya Pradesh. In DTC (supra), this Court observed “We express our disagreement with the decision of the Madhya Pradesh High Court”,” it noted.
18/09/17 Apoorva Mandhani/Live