Hire-purchase transactions treated as resale where the dealer intended to pass property in goods to the hirer.

Hire-purchase transfers were treated in substance as resale transactions under the Bihar Sales Tax Act, 1959, because the decisive factor was the dealer's intention to pass property in the goods to the hirer. Where the arrangements were entered into with the ultimate object of resale and most had in fact matured into sales, the goods were not regarded as being used for any purpose other than resale. On that basis, the second proviso to section 7(2)(b) was held inapplicable on the facts, and the revenue could not rely on the ultra vires explanation to section 2(p).

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Issues: Whether transfer of goods under hire-purchase amounted to resale under the Bihar Sales Tax Act, 1959, and whether such transfers attracted the second proviso to section 7(2)(b) of the Act.

Analysis: The transactions were examined in their substance rather than their form. Hire-purchase was treated as a commercial method of sale in which the decisive factor was the dealer's intention to pass property in the goods to the hirer. Where the transactions were entered into with the ultimate object of resale and most of them had in fact ripened into sales, the goods could not be said to have been utilised for any purpose other than resale. The reference to the ultra vires explanation to section 2(p) could not assist the revenue, and the second proviso to section 7(2)(b) was held inapplicable on the facts.

Conclusion: Transfer of goods under hire-purchase amounted to resale, and the second proviso to section 7(2)(b) did not apply. The questions were answered in favour of the assessee.

Final Conclusion: The reference was answered by holding that hire-purchase transfers in the facts of the case were for resale and did not justify inclusion in the purchaser's taxable turnover under the second proviso.

Ratio Decidendi: For sales tax purposes, a hire-purchase transaction is to be judged by its real substance and the dealer's intention; if the arrangement is entered into for resale and to pass property to the hirer, it is not a use of the goods for a purpose other than resale.

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