Transfer of the right to use vehicles governs tax deduction at source on hire charges, not mere payment for use.

Tax deduction at source from vehicle-hire charges is justified only if the arrangement amounts in substance to a transfer of the right to use the vehicles, constituting a deemed sale under the Assam Value Added Tax Act, 2003. Whether that transfer exists depends on the contractual terms and the factual control passed under the transaction. On the record, no material showed the terms of the verbal agreement or that the vehicles were leased or that effective control and the right to use had passed to the respondent-corporation, so deduction at source was not justified.

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Issues: Whether the respondents could deduct tax at source from the petitioner's hire charges without establishing that the transactions amounted to a transfer of the right to use the vehicles, and therefore a taxable deemed sale under the Assam Value Added Tax Act, 2003.

Analysis: Liability to tax on hire transactions arises only where there is a transfer of the right to use goods, not merely a use of goods or payment of hire charges. The legal character of the transaction depends on its substance and the terms of the agreement, and the question whether such a transfer exists is one of fact to be determined from the contractual arrangement. On the record, no material was produced to show the terms of the verbal agreement or to establish that the vehicles were leased or that the effective control and right to use had passed from the petitioner to the respondent-corporation. In the absence of such proof, no deduction at source could be justified.

Conclusion: The respondents were not permitted to deduct tax at source from the petitioner's bills unless and until it was shown that the vehicle-hire transactions constituted a transfer of the right to use the vehicles.

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