K B INDUSTRIES Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) Heard learned counsel for the petitioners and also the learned Standing Counsel. In view of the exchange of affidavits and in accordance with the Rules of the court the present writ petition is being disposed of finally at the stage of admission. The petitioner seeks quashing of order dated January 13, 1993, passed by the Divisional Level Committee, Agra, respondent No. 2 rejecting the review application of the petitioner. The petitioner earlier made an application under section 4-A of the U. P. Sales Tax Act for grant of eligibility certificate which was rejected on June 15, 1992, annexure 3 to the writ petition, on the grounds that sale deed filed by the petitioner goes to show that besides some of the partners being the owners of the land, there are other owners of the land, and no registered lease deed has been filed by the petitioner. The petitioner being aggrieved, filed a review application before the said authority on June 20, 1992 which was also rejected by means of an order dated January 13, 1993, annexure 5 to the writ petition, on the ground that the land in question on which the unit is situate belongs to seven persons out of which only two are partners in the petitioners' firm. Neither partition has taken place nor any lease deed has been executed. It is this order which is subject-matter of challenge before this Court. The short facts of the case are that the land on which the unit is situate belongs to the two partners of the petitioner's firm, namely, Suresh Chandra Agarwal and Dinesh Chandra Agarwal and to the husbands of the two other partners namely, Smt. Rani Agarwal and Smt. Aruna Agarwal. The other three persons namely, Bal Kishan Agarwal, Nanhak Chandra Agarwal and Sunil Agarwal are the brothers and all are the sons of Sri Kumar Sen Agarwal. Sri Kumar Sen Agarwal is also one of the partners of the said firm. Since the land was purchased by the aforesaid seven brothers, hence they do not thought it proper to execute the lease deed amongst themselves to give the said land to the said firm consisting of five persons, the two persons being the owner, the other two partners being wives of the owners of the land and the fifth person is the father of all the seven brothers. In order to resolve the situation, all of them filed an affidavit before the Sales Tax Officer, Sector-I, Firozabad that the land was purchased on June 3, 1988 by the seven brothers but out of the above land on a small portion of it factory (unit) was established under the name and style of M/s. K. B. Industries and is being given in the share of Suresh Chandra Agarwal and Dinesh Chandra Agarwal and the said land on which the unit is situate will be exclusively owned by the said two persons. The petitioner by filing review application dated June 20, 1992 gave all these facts in detail further relying on a circular and the decision of this Court made earlier. However, the reviewing authority by means of the impugned order rejected the said application without considering the aforesaid facts as stated in the review application and the reference of the circular including the decision referred to therein. A reference has been made by the petitioner in the review petition of the decision of this Court reported in Kamal Agro Industries v. State of U. P. 1987 UPTC 1222 in which it is held that the application for eligibility certificate cannot be rejected on the ground that the unit is situate over a piece of land which belongs to only two of the four partners constituting the firm. The said judgment also relied on clause 8 of the Government circular issued on March 10, 1987. According to the said clause the land on which the unit is situated may either be in the name of the owner or of the partners of the firm. On behalf of the respondents, the learned Standing Counsel has urged that in view of small (c) of the explanation of section 4-A the unit must be on a land or building or both, owned, or taken on lease for a period of not less than seven years by such dealer. Before embarking upon two possible contentions raised one by the petitioner and the other by the learned Standing Counsel, it is necessary to refer section 4-A. It provides for increasing the production of any goods or for promoting the development of any industry in the State. It further provides for exemption from sales tax wholly or partly and the incentives are given for establishment of such unit. The learned Standing Counsel relied on a Full Bench decision of this Court reported in 1970 UPTC 730 in the matter of Commissioner of Sales Tax, U. P. v. Behari Lal Ram Krishna. In that case rule 20-B (a) of the U. P. Sales Tax Rules, 1948, was called in question. It was held that the dealer, seeking to obtain exemption from tax for the entire assessment year, must make exemption application within 30 days of the commencement of the assessment year, and also deposit within that period, one-fourth of the exemption fee, calculated on the turnover of the previous year - where the dealer makes good the deficiency even after the prescribed time, his exemption application may be treated as in order, but that can be only with reference to the date, on which the deficiency is made good. The application will, then be considered as having been made on that date, and on the basis of the said Rule the dealer will be entitled to a provisional exemption certificate. What in fact is held in that case is that before exemption can be claimed, the person claiming exemption must strictly fulfil the conditions underlying the grant of exemption and comply with all the requirements necessary before such grant is made. This case was not concerned regarding interpretation of the word in a fiscal statute or statute encouraging an industrial activity giving concession or benefit to the subject. It only concerned, regarding compliance of precondition before exemption should be granted. It is true that no exemption can be granted unless the subject complies with condition preceding the claim for such exemption and this should be strictly construed. This, however, is not an authority of construing a word in a statute. In [1989] 77 ITR 431 (SC); 1989 UPTC 1300 (Commissioner of Income-tax, Amritsar v. Strawboard Manufacturing Co. Ltd.) it is held : " It is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute. " Similarly, in [1992] 196 ITR 188 (SC); 1992 UPTC 857 (Bajaj Tempo Ltd. , Bombay v. Commissioner of Income-tax, Bombay) it is held : " A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. " This Court further while interpreting this very provision of section 4-A explanation 1 (c) construed the provision liberally in P. P. S. Electronics Industries, Kanpur v. State of U. P. 1993 UPTC 853. This was the case where the new unit started on a leased premises - Held : Explanation (1) (c) does not require a single lease deed for entire period of seven years - unregistered lease deed for eight years with effect from May 1, 1989. Before expiry of period of one year, registered lease deed was executed for the eight years with effect from May 1, 1989. Further the court construing the provision liberally, held that it cannot be a ground for rejection of the claim petition under section 4-A. Coming to the facts of the present case we find that the rejection of the review petition was on two grounds - firstly there was no partition inter se between the owners of the land and secondly the petitioner has not filed any lease deed. So far as the first ground is concerned the word used in explanation (1) (c) to section 4-A is "owned". It is not in dispute that at least two partners are the joint owners of the land on which the unit is established. Challenge to the ownership could only be by other co-owners but in this case in order to eliminate any doubt to the right of the two partners seven brothers, joint owners of this land cleared that portion on which the unit is situate exclusively holding to the share of the two partners, viz. , Sri Suresh Chandra Agarwal and Sri Dinesh Chandra Agarwal. For this affidavit has been filed before the respondent authority by all the seven brothers. In view of this, mere non-registration of the document, and there being on objection by other co-owners, cannot constitute a ground for rejection of the claim on the benefit under section 4-A on the ground that there was no partition amongst the other owners. In view of the settled law, this provision is a beneficial provision and provision granting incentive for establishing new unit within the State, the word "owned" has to be liberally construed and not strictly. On the facts and circumstances of the case read with clause 8 of Government circular dated March 10, 1987 and the decision of this Court in Kamal Agro Industries v. State of U. P. 1987 UPTC 1222 the word "owned" could include the case of the petitioner for the purpose of this Act and hence the respondents are not justified in rejecting the application on this ground. The second ground for rejection that the petitioner has not filed any lease deed as required is also not sustainable. Since the two partners of the firm being joint owners coupled with the aforesaid facts the petitioner thought it not proper to execute a lease deed. There could be no question of filing a lease deed where the co-owners or the joint owners in which other co-owners disclaim their right to the extent on which the unit is established in favour of the partners of the firm. Hence both the grounds are not sustainable. However, on the facts and circumstances of the case and looking to the provision of section 4-A we find that the rejection of the application of the petitioners under section 4-A on these grounds is not sustainable. In spite of the petitioners having referred to the circular of the Government including the decision of this Court earlier in the review application no reference has been made in the impugned order. Accordingly, the impugned order dated January 13, 1993, annexure 5 to the writ petition, is hereby quashed. The case is sent back to the said authority for deciding afresh in the light of the observations made above by us by means of a speaking order preferably within a period of 3 months from the date a certified copy of this order is filed before the said authority. Until disposal of the said review application further assessment proceedings for the assessment years 1989-90, 1990-91 and 1991-92 both under the U. P. and Central Sales Tax Act shall remain stayed. The petitioner shall file a certified copy of this order before the said authority within a period of two weeks from the date of issuance of certificate copy. With the aforesaid observations, the present writ petition is disposed of finally. A certified copy of this order shall be supplied to the learned counsel for the petitioner on payment of usual charges within a week. Writ petition allowed. .