1997 (7) TMI 635 - HC - VAT and Sales Tax

Court rules rent for hydraulic press not taxable under Kerala Sales Tax Act.

The Court dismissed the tax revision cases concerning the inclusion of rent received for the use of a hydraulic press in the taxable turnover. It was held ... - Issues Involved:1. Whether the rent received for the use of the hydraulic press forms part of the taxable turnover.2. Whether the transaction qualifies as a 'sale' under the Kerala General Sales Tax Act, 1963.Summary:Issue 1: Taxable Turnover InclusionThe Deputy Commissioner of Sales Tax (Law) filed two tax revision cases concerning the assessment years 1984-85 and 1987-88. The respondent-assessee, a registered dealer under the Kerala General Sales Tax Act, engaged in manufacturing V straps, had their assessments reopened u/s 19 of the Act. The assessing authority included amounts of Rs. 11,280 and Rs. 22,560, representing rent received for the use of the hydraulic press, in the taxable turnover. The Sales Tax Appellate Tribunal deleted these additions, leading to the revisions filed by the Deputy Commissioner.Issue 2: Definition of 'Sale'The core question was whether the rent received for the hydraulic press use constituted a 'sale' under explanation (3B) to clause (xxi) of section 2 of the Kerala General Sales Tax Act, 1963. The Tribunal found that the hydraulic press was part of the plant and machinery embedded in the factory, used by customers when the factory was idle. The Tribunal concluded that this arrangement was a permissive right to use, not a transfer of the right to use, and thus did not qualify as a 'sale.'Legal Provisions and InterpretationThe Court examined the definitions of 'dealer,' 'goods,' 'sale,' 'taxable turnover,' and 'turnover' u/s 2 of the Act. It emphasized that for a transaction to be taxable, it must involve a transfer of property in goods or a transfer of the right to use goods. The hydraulic press, being part of the immovable plant and machinery, did not qualify as 'goods' under section 2(xii). Consequently, the rent received could not be included in the taxable turnover.ConclusionThe Court concurred with the Tribunal's finding that the transaction was merely a permission to use the hydraulic press and not a transfer of the right to use. Therefore, the rent received did not constitute a 'sale' under the Act. The revisions were dismissed, and the Tribunal's order was upheld, with no order as to costs. Petitions dismissed.