Transfer of right to use goods turns on possession and effective control, making bus hire taxable under trade tax law.

A contract for supply of buses was treated as a transfer of the right to use goods where the buses were identifiable and deliverable, and the transferee had possession and effective control during the contract period. The analysis notes that UPSRTC appointed conductors, regulated operations, issued tickets, and received the hire amount, while ownership continued to rest with the transferor. On that basis, the transaction was said to fall within the tax net under Section 3-F of the U.P. Trade Tax Act. The earlier decision cited by the assessee was distinguished because it lacked a clause conferring possession and effective control on the transferee.

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Issues: Whether the buses supplied under the contract amounted to a transfer of the right to use goods so as to attract tax under Section 3-F of the U.P. Trade Tax Act.

Analysis: The contract showed that during the contracted period the buses remained in the possession and effective control of UPSRTC, which appointed the conductors, regulated operation of the buses, issued tickets, and enjoyed the right to receive the hire amount. The agreement also restricted transfer of ownership without prior permission and treated breach as cancellation. Applying the test for transfer of right to use goods, the Court found that the buses were identifiable, available and deliverable, and that possession and effective control had been transferred for the contract period. The earlier decision relied on by the assessee was distinguished because, on its own terms, it did not contain a clause conferring possession and effective control on UPSRTC.

Conclusion: The transaction constituted a transfer of the right to use the buses and was taxable under Section 3-F of the U.P. Trade Tax Act.

Final Conclusion: The revisions were allowed, the appellate orders were set aside, and the assessment order was restored.

Ratio Decidendi: A contract amounts to a transfer of the right to use goods when the goods are identifiable and deliverable and the transferee obtains possession and effective control for the relevant period, even if ownership remains with the transferor.

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