2005 (8) TMI 649 - HC - VAT and Sales Tax

Agreements Ruled Non-Transferable: No Trade Tax on Bus Use; Control Retained by Assessee; Tribunal's Decision Upheld.

Commissioner, Trade Tax, UP., Lucknow Versus Jamuna Prosad Jaiswal

Commissioner, Trade Tax, UP., Lucknow Versus Jamuna Prosad Jaiswal - [2008] 13 VST 403 (All) Issues Involved:1. Applicability of Section 3F of the U.P. Trade Tax Act, 1948.2. Determination of whether the transaction constituted a transfer of the right to use goods.3. Analysis of the agreements between the assessee and the companies (M/s. IFFCO and M/s. BPCL).Issue-wise Detailed Analysis:1. Applicability of Section 3F of the U.P. Trade Tax Act, 1948:The present revision under section 11 of the U.P. Trade Tax Act, 1948 is directed against the order of the Tribunal dated May 30, 1996, relating to the assessment year 1987-88. The assessing authority levied tax under section 3F of the Act on the amounts received by the assessee from M/s. IFFCO, Phulpur, Allahabad, and M/s. BPCL, Naini, Allahabad towards hire charges. The Tribunal allowed the assessee's appeal, which led to the current revision.2. Determination of Whether the Transaction Constituted a Transfer of the Right to Use Goods:The core issue was whether the agreements between the assessee and the companies involved a transfer of the right to use the buses, which would make the transaction taxable under section 3F of the Act. The learned Standing Counsel argued that the charges received were hiring charges liable to tax under section 3F, asserting that the vehicles were for the use of the companies. Conversely, the assessee contended that there was no transfer of the right to use the buses, as the possession and control of the buses remained with the assessee, and the entire expenses for running the buses were borne by the assessee.3. Analysis of the Agreements Between the Assessee and the Companies:The Tribunal and the High Court analyzed the agreements and found that the effective control of the buses was never transferred to the companies. The agreements stipulated that the buses were provided for transporting employees, and the assessee retained control over the buses, including bearing all operational costs and risks.Legal Precedents and Interpretation:Several legal precedents were cited to support the conclusion that there was no transfer of the right to use the buses:- Kandoi Transport v. S.T.O., Assessment Unit, Barbil: The Orissa High Court held that hire charges do not constitute a transfer of the right to use if the control, custody, and possession remain with the owner.- Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer: The Andhra Pradesh High Court and subsequently the Supreme Court held that effective control must be transferred for a transaction to be considered a transfer of the right to use.- Ahuja Goods Agency v. State of Uttar Pradesh: The Division Bench of the Allahabad High Court held that transportation charges were not taxable under section 3F if there was no transfer of possession of the vehicle.Conclusion:Upon examining the terms of the contracts, the High Court concluded that the effective control of the buses remained with the assessee, and there was no transfer of the right to use the vehicles to the companies. Consequently, the provisions of section 3F of the Act were not applicable. The order of the Tribunal was upheld, and the revision was dismissed.