Transfer of right to use goods turns on contract execution, while scheme transfers vest only on the effective date.

A scheme of arrangement transferred assets only from the effective date because the scheme linked actual transfer and vesting to that date, while the appointed date governed only inter se accounting arrangements. For levy of tax on the transfer of the right to use machinery under Section 3-F of the U.P. Trade Tax Act, 1948, the decisive event is execution of the contract conferring that right. The mere presence of the machinery in Uttar Pradesh does not determine the tax situs; where the agreement was executed outside the State, the taxable event arose outside Uttar Pradesh and no tax was attracted there.

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Issues: (i) Whether the transfer of assets under the scheme of arrangement took effect from the appointed date or only from the effective date. (ii) Whether tax under Section 3-F of the U.P. Trade Tax Act, 1948 was leviable on the transfer of the right to use machinery when the agreement was executed outside Uttar Pradesh.

Issue (i): Whether the transfer of assets under the scheme of arrangement took effect from the appointed date or only from the effective date.

Analysis: Clause 2.7 of the scheme provided that the assets and properties of the transferor company would stand transferred and vested without any further act or deed only on the scheme becoming effective. The appointed date governed the inter se accounting and trustee arrangement under the scheme, but the actual transfer and vesting for all purposes were linked to the effective date.

Conclusion: The transfer of assets took effect only from the effective date, not from the appointed date, and this objection by the assessee failed.

Issue (ii): Whether tax under Section 3-F of the U.P. Trade Tax Act, 1948 was leviable on the transfer of the right to use machinery when the agreement was executed outside Uttar Pradesh.

Analysis: The levy under Section 3-F is attracted by the transfer of the right to use goods, and the taxable event occurs when the contract conferring that right is executed. The mere presence or consignment of the machinery within the State does not determine the situs of the tax. Since the lease agreement was executed outside Uttar Pradesh, the transfer of the right to use occurred outside the State and no taxable event arose within Uttar Pradesh.

Conclusion: Tax under Section 3-F was not exigible in Uttar Pradesh, and this issue was decided in favour of the assessee.

Final Conclusion: The revision succeeded because the State lacked authority to levy tax on the transfer of the right to use machinery on the facts of the case, and the Tribunal's order was set aside.

Ratio Decidendi: For a tax on transfer of the right to use goods, the decisive event is execution of the contract conferring that right, and the taxable situs is the place where that contract is executed, not the location or movement of the goods.

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