Hire-purchase transaction treated as sale where full price, retained title, and ownership obligations showed substance over form.

An agreement requiring the transferee to pay the full price of machinery in instalments, while the transferor retained title only until full recovery, was treated as a hire-purchase arrangement rather than a mere hire. The court applied the principle that the substance of the contract must be gathered from the agreement as a whole and held that obligations such as maintenance and payment for spares were consistent with ownership in substance. A clause allowing the machinery to be taken back at residual value did not change the essential character of the transaction. The machinery transfer was therefore a sale within section 2(g) of the Bihar Sales Tax Act, 1947, and taxable as such.

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Issues: Whether the supply of machinery under the agreement was a hire transaction or a hire-purchase transaction amounting to a sale within the meaning of section 2(g) of the Bihar Sales Tax Act, 1947.

Analysis: The definition of sale in the Bihar Sales Tax Act was an enlarged one and included transfers under a hire-purchase or other installment system of payment. The agreement required the contractor to pay the full actual price of the machinery, retained the Corporation's title until full recovery of the price, and imposed obligations consistent with ownership in substance, including maintenance of the machinery and payment for spares. The clause providing for the Corporation to take back the machinery at residual value on completion of the work did not alter the essential character of the original transaction. Applying the principle that the substance of the agreement must be gathered from its terms as a whole, the arrangement was not a mere hire but a hire-purchase in substance.

Conclusion: The transaction in respect of the machinery in Group A was a sale within section 2(g) of the Bihar Sales Tax Act, 1947, and the property in the goods passed to the contractor for sales tax purposes; the finding was against the assessee and in favour of the Revenue.

Ratio Decidendi: Where an agreement obliges the transferee to pay the full price of goods in installments and the goods remain subject to the transferor's title only as security until payment is complete, the transaction is a hire-purchase or installment sale and is deemed to be a sale under the taxing statute.

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