Harmonious construction upheld tax on post-appointed-day lease rentals under transfer of right to use goods

Section 3(b) of the Delhi Sales Tax on Right to Use Goods Act, 2002 was upheld because it was read harmoniously with section 2(n) and the deeming fiction in article 366(29A). The Court rejected the argument that one provision of the same Act could be struck down as ultra vires another provision of the same Act. It held that, in transfer-of-right-to-use transactions under pre-existing lease agreements, tax attaches to lease rentals received or receivable after the appointed day, since deferred consideration by instalments falls within the statutory scheme. The charging provision therefore remained valid and the post-appointed-day rentals were taxable under the Act.

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Issues: Whether section 3(b) of the Delhi Sales Tax on Right to Use Goods Act, 2002 could be struck down as being contrary to section 2(n) of the same Act, and whether lease rentals received after the appointed day under pre-existing lease agreements were liable to tax under the Act.

Analysis: The constitutional amendment inserting article 366(29A) enlarged the scope of "tax on the sale or purchase of goods" to include transfer of the right to use goods. The Act, 2002 adopted that legislative scheme and, by section 3, made tax payable on the turnover of sales in respect of transfers of the right to use goods agreed to before the appointed day but exercised or continued after that day. The challenge based on section 3(b) being ultra vires section 2(n) was rejected because one provision of the same enactment cannot be treated as ultra vires another provision of the same enactment. The Court applied harmonious construction and read section 2(n) and section 3(b) together so that deferred payment in lease transactions meant consideration payable by instalments, with tax attaching when the rentals were received or receivable after the appointed day. This construction preserved both the charging provision and the definition of sale and accorded with the deeming fiction introduced by article 366(29A).

Conclusion: Section 3(b) was upheld, and lease rentals received after the appointed day under pre-existing agreements were held taxable under the Act.

Final Conclusion: The writ petition failed because the statutory scheme was construed to validly tax post-appointed-day rentals in transfer-of-right-to-use transactions, leaving the impugned charging provision intact.

Ratio Decidendi: Where a statute deems transfer of the right to use goods to be a sale, the charging provision governing post-appointed-day receipts must be read harmoniously with the definition clause, and a provision of the same Act cannot be assailed as ultra vires another provision of that Act.

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