Transfer of right to use goods upheld for crane hire arrangement, making the transaction taxable as a deemed sale.

A crane hire arrangement was held to be a transfer of the right to use goods because the contract, read as a whole, placed the crane on hire for twelve months at a monthly charge and effectively transferred possession for use by the hirer. The court treated the decisive question as whether the goods were transferred for use within clause (29A) of Article 366, rather than whether the transaction could be labelled bailment. On those terms, the arrangement fell within section 5-E of the Andhra Pradesh General Sales Tax Act, 1957, and the levy was upheld.

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Issues: Whether the transaction for hiring and operating the crane amounted to a transfer of the right to use goods so as to attract tax under section 5-E of the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: The agreement had to be read as a whole to ascertain the true nature of the transaction. The arrangement fixed the crane on hire for twelve months at a monthly hire charge, and the terms showed that the crane was placed for use by HSL for rendering services. In such a case, the decisive question was not whether the transaction could be described as bailment, but whether the goods were transferred for use within the meaning of clause (29A) of Article 366 of the Constitution of India. On the terms recorded, the crane was given on hire and possession for use was effectively transferred, bringing the transaction within section 5-E.

Conclusion: The transaction was liable to tax under section 5-E, and the revision failed.

Final Conclusion: The levy was upheld because the crane hire arrangement constituted a taxable transfer of the right to use goods.

Ratio Decidendi: Where the contract as a whole shows that goods are placed on hire for use by another and possession for such use is effectively transferred, the transaction amounts to a transfer of the right to use goods and is taxable as a deemed sale.

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