Hire-purchase documentation may amount to a true sale and resale for sales tax where title actually passes to the finance company.

Hire-purchase documents may be treated as a real sale followed by a hiring back where, read as a whole, they show an actual transfer of title to the finance company and a later resale to the customers. A credit motive does not prevent that characterisation if the sale letter, bill, receipt and hire-purchase agreement are consistent with genuine transfer of property and no connected document displaces that effect. A registration form describing the customers as owners was explained by the statutory definition of owner for hire-purchase vehicles. On that analysis, the resale was liable to sales tax and the challenge failed.

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Issues: Whether, on the true construction of the hire-purchase arrangements evidenced by the documents, there was a sale by the customers to the finance company at the inception of the transaction and a resale by the company to the customers on termination, so as to attract sales tax.

Analysis: The documents had to be read as a whole and the real nature of the transaction determined from their language and effect. The existence of a credit motive did not prevent the parties from structuring the dealings as a real sale followed by a hiring back. The sale letter, bill, receipt and hire-purchase agreement were consistent with an actual transfer of title to the company, and nothing in the connected documents displaced that conclusion. The reference to the customers as owners in the registration-related form was explained by the statutory definition of owner in relation to a hire-purchase vehicle under section 2(19) of the Motor Vehicles Act, 1939.

Conclusion: The arrangements constituted real sales by the customers to the company and resales by the company to the customers, and the resale was liable to sales tax.

Final Conclusion: The challenge to the sales tax order failed, and the petition was dismissed.

Ratio Decidendi: Where the contractual documents, read as a whole, show an actual transfer of property to the finance company and a true hiring back, the transaction is a sale followed by a resale for sales tax purposes, notwithstanding that the commercial object is to obtain credit.

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