Pure agent treatment denied for on-road charges in vehicle leasing; registration and insurance costs form part of taxable value.

Amounts recovered for road tax, registration fee, motor vehicle life tax, RTO charges and insurance premium in an operating vehicle lease were held to form part of the taxable value of the leasing service. The applicant retained ownership of the vehicles, and the on-road charges were necessary to make the vehicles usable and to satisfy statutory registration and insurance requirements. As the payments were not shown to have been incurred separately on the lessee's authorisation in the capacity of a pure agent, they were treated as expenses incurred on the applicant's own account and as incidental to the leasing supply. Those amounts were therefore includible in transaction value.

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Issues: Whether the amounts recovered towards road tax, registration fee, motor vehicle life tax, RTO charges and insurance premium in the course of vehicle leasing are excludible from the value of supply as payments made in the capacity of a pure agent.

Analysis: The arrangement was an operating lease in which the applicant retained ownership of the vehicles and the on-road charges were incurred to make the vehicles usable on public roads. The statutory requirements for registration and insurance were integral to the procurement and leasing of the vehicles and were not shown to be separately incurred on authorisation as a pure agent for the lessee. The payments were therefore treated as expenses incurred on the applicant's own account and as incidental expenses connected with the leasing supply. Under the valuation provisions, such amounts formed part of the transaction value of the leasing service.

Conclusion: The applicant was not acting as a pure agent in respect of the on-road components, and those amounts were includible in the taxable value of the leasing service.

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