Income from REP licenses cannot be taxed as turnover under the Tamil Nadu General Sales Tax Act, 1959.

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 25-03-2026 CORAM THE HON'BLE DR. JUSTICE G. JAYACHANDRAN AND THE HON'BLE MR.JUSTICE SHAMIM AHMED Tax Case (Revision) No. 35 of 2015 The State of Tamil Nadu, Rep by The Joint Commissioner (CT), Large Taxpayers Unit, No.34 (123) Durgar Towers, 5^th Floors, Marshal Road, Egmore, Chennai – 600 008.

..Petitioner(s)

Vs Tvl.Ashok Leyland Limited, No.480, Annasalai, Chennai.

..Respondent(s)

Prayer: Tax Case (Revision) is filed under Section 38 of Tamil Nadu General Sales Tax Act, 1959 praying to revise the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai, dated 11.04.2014 passed in STA No.123 of 2006.

For Petitioner(s): Mr.V.Prasanth Kiran Government Advocate (Taxes)

For Respondent(s): Mr.N.Prasad

ORDER

(Order of the Court was made by Dr.G.Jayachandran J.)

This Tax Case (Revision) is filed to revise the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai dated 11.04.2014 passed in STA No.123 of 2006.

2. The respondent dealer is an assessee falling within the jurisdiction of the Deputy Commissioner (CT)-III, Large Taxpayers Unit, Chennai. For the Assessment Year 1993-1994, under the TNGST, 1959, the respondent was originally assessed to tax vide order dated 31.03.2001, and the turnover was assessed as Rs.1,51,76,000/- being sales of REP licenses to the Reserve Bank of India. Tax at the rate of 4% on the said turnover was imposed by the Assessing Authority, and penalty was also levied for non-reporting of the sale turnover. The same was challenged by the assessee before the Appellate Authority, namely, the Deputy Commissioner (CT), Chennai, in A.P.No.62 of 2001. Meanwhile, the Assessing Officer suo motu revised the rate of tax on the turnover from 4% to 8% on the ground that Reserve Bank of India, which purchased the REP licenses is not a Government Department. Therefore, against the enhanced rate of tax, the assessee has preferred another appeal before the Appellate Authority. The Appellate Authority had an opportunity to consider the validity of imposing turnover tax on the premium paid by the assessee for the REP licenses, and confirmed the enhancement of tax to 8%. However, it restricted the turnover to Rs.22,58,840/- from Rs.1,51,76,000/- by holding that only the premium income received on the sale of REP licenses is alone liable to be taxed as turnover. The penalty levied was also deleted, holding that there was no wilful non-disclosure of the turnover. Being aggrieved further, the assessee preferred an appeal before the Tribunal challenging the rate of tax whereas the Department filed an appeal challenging the deletion of penalty and restriction of turnover. By a common order dated 11.04.2014, the Tribunal confirmed the order of the Appellate Authority by dismissing both the appeals.

3. Today, it is brought to our notice that a further revision filed by the State against the common order passed in STA No.122 of 2006 was dismissed by the co-ordinate Bench of this Court on 05.06.2015 in Tax Case (Revision) No.36 of 2015. The present Tax Case (Revision) No.35 of 2015 filed against the STA No.123 of 2006 is taken up for consideration today. This appeal is in respect of restriction of turnover tax to an extent of Rs.22,58,840/-.

4. Heard the learned Counsel on either side and perused the materials available on record.

5. We find that the assessee had surrendered REP licenses to the Reserve Bank of India and disclosed a turnover of Rs.1,51,76,000/-. However, the premium gained by the assessee by way of surrender of REP licenses to the Reserve Bank of India was only Rs.22,58,840/-. Therefore, the Appellate Authority as well as the Tribunal held that the aggregate value in so far as the surrender of REP licenses can only be Rs.22,58,840/