Severance rights determine whether earth-fixed equipment is taxable as goods under sale or lease arrangements.

Property attached to the earth was treated as taxable goods only if the lease or sale deed conferred a right of severance or removal on the transferee or lessee; absent such a clause, the equipment remained immovable property. Applying that principle, the turnover relating to turbo alternators and boiler equipment was remitted for fresh determination on the terms of the relevant contracts, with additional evidence allowed for the boiler sale deed. Tax on the baggase/lugdi turnover was upheld because the assessee had disclosed the sale and collected tax, while works contract turnover under section 3AAAA was held not taxable for the relevant year to the extent noted, as the later amendment and notification were not retrospective.

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Issues: (i) Whether lease rent received for turbo alternators fixed to the earth was taxable as turnover of goods; (ii) Whether tax on sale of baggase could be sustained where the assessee had disclosed sale of lugdi and collected tax on it; (iii) Whether tax on sale of boiler equipment installed and fixed to the ground was sustainable; (iv) Whether turnover received for execution of works contract was taxable under section 3AAAA for the relevant assessment year.

Issue (i): Whether lease rent received for turbo alternators fixed to the earth was taxable as turnover of goods.

Analysis: The taxable character of property attached to the earth depended upon the statutory definition of "goods" and, more particularly, upon whether the agreement conferred a right on the lessee to sever and remove the equipment. If the equipment could be detached by the lessee under the contract, it could be treated as movable property. If no such clause existed, the subject-matter of the lease would remain immovable property and would not attract tax as goods.

Conclusion: The issue was remitted to the Tribunal for fresh decision in accordance with law.

Issue (ii): Whether tax on sale of baggase could be sustained where the assessee had disclosed sale of lugdi and collected tax on it.

Analysis: The finding recorded by the first appellate authority was based on the record and on the conclusion that the assessee itself had disclosed sale of lugdi against Form III-B and had recovered tax on such sale. The challenge raised before the revisional court did not effectively assail that finding or the basis on which the appellate authority proceeded.

Conclusion: The levy on this turnover was upheld and the question was answered in favour of the revenue and against the assessee.

Issue (iii): Whether tax on sale of boiler equipment installed and fixed to the ground was sustainable.

Analysis: The decisive test was not merely whether title to the land passed, but whether the sale deed conferred a right on the purchaser to remove the boiler equipment from its embedded position. If such right existed, the equipment could be treated as movable property subject to further objections. If no such right existed, it would remain immovable property notwithstanding the transfer of title. The Tribunal had applied an erroneous test and had not examined the sale deed on this aspect.

Conclusion: The matter was remitted to the Tribunal for a fresh decision, and additional evidence was permitted in relation to the sale deed.

Issue (iv): Whether turnover received for execution of works contract was taxable under section 3AAAA for the relevant assessment year.

Analysis: For the relevant year, bricks and gitti were taxable at the point of sale by the manufacturer or importer, not at the point of sale to the consumer. The later amendment and notification did not operate retrospectively to fasten liability for the assessment year in question.

Conclusion: Tax liability under section 3AAAA was not attracted to that extent, and the question was answered in favour of the assessee.

Final Conclusion: The revision succeeded in part, one question was decided against the assessee, one question was decided in the assessee's favour, and two issues were sent back for fresh adjudication by the Tribunal.

Ratio Decidendi: Property attached to the earth is taxable as goods only if the contract or sale deed confers a right of severance or removal on the transferee or lessee; absent such a right, it remains immovable property outside the scope of goods.

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