Deemed sale under lease transactions: only rentals received or receivable in the relevant period form taxable turnover.

In a deemed sale involving transfer of the right to use goods, taxable turnover is confined to the rental consideration received or receivable in the relevant tax period. Article 366(29A)(d) and the Haryana VAT framework treat the taxable event as the transfer of the right to use, not mere delivery of the vehicle, and turnover is linked to amounts accruing during the tax period. Accordingly, the full lease rentals for the entire lease term could not be brought to tax in the year of delivery; only the rentals falling due in the relevant period were includible in turnover.

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Issues: Whether lease rentals receivable for the entire lease period could be treated as sale price and included in turnover in the year of delivery of the vehicles, or whether only the rentals received or receivable during the relevant tax period were includible.

Analysis: Article 366(29A)(d) of the Constitution and the corresponding definition of sale under the Haryana Value Added Tax Act, 2003 treat the transfer of the right to use goods as a deemed sale. The taxable event is the transfer of that right, not the mere delivery of the goods for use. The statutory scheme also links gross turnover and sale price to amounts received or receivable during the tax period, while the Haryana Value Added Tax Rules, 2003 define turnover by reference to the value of goods sold during that period. In a lease transaction, where the lessee's right to use the vehicle depends upon periodic rentals, the amount that can be brought to tax is the rental received or receivable during the relevant tax period, not the entire lease consideration upfront.

Conclusion: The entire lease rentals for the full lease term could not be included in turnover in the year of delivery; only the rentals received or receivable during the relevant tax period were taxable, and the issue was decided in favour of the assessee.

Final Conclusion: The assessment approach treating the full lease consideration as turnover at the time of delivery was unsustainable, and the tax liability had to be confined to the rentals accruing in the relevant tax period.

Ratio Decidendi: For a deemed sale by transfer of the right to use goods, the taxable turnover is confined to consideration received or receivable in the relevant tax period, and not the entire lease consideration merely because the goods are delivered.

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