Transfer of right to use goods requires exclusive control; common amenities in a lease were held not to create a deemed sale.

Tax on the transfer of the right to use goods under the APGST and APVAT Acts arises only where identifiable goods are placed under the transferee's effective and exclusive control for use. Here, the lease deeds showed that furniture, fixtures and common amenities remained under the landlords' control, were shared among occupants, and were not delivered as exclusive goods for any tenant. The arrangements were construed as composite contracts for renting with incidental facilities, not as independent transfers of specific goods or deemed sales. On that basis, the tax demands on the rental component were held unsustainable and the impugned orders were set aside.

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Issues: (i) Whether rental receipts attributed to furniture, fixtures and common amenities in the leased premises amounted to a transfer of the right to use goods liable to tax under the APGST Act and APVAT Act. (ii) Whether the lease arrangements were merely service contracts, incapable of being treated as deemed sales.

Issue (i): Whether rental receipts attributed to furniture, fixtures and common amenities in the leased premises amounted to a transfer of the right to use goods liable to tax under the APGST Act and APVAT Act.

Analysis: Article 366(29A)(d) of the Constitution and the relevant taxing provisions apply only where there is a transfer of the right to use goods for consideration. The lease deeds showed that the landlords retained effective possession and control, several facilities were common to multiple occupants, and the items were not identified or delivered as exclusive goods for any particular tenant. On the facts, the essential ingredients of a taxable transfer of the right to use goods were not established.

Conclusion: The levy of tax on the rental component referable to furniture, fixtures and common amenities was not sustainable.

Issue (ii): Whether the lease arrangements were merely service contracts, incapable of being treated as deemed sales.

Analysis: The agreements were construed as a whole and reflected a composite arrangement for provision of facilities and amenities incidental to renting of immovable property. The contractual terms did not show consensus ad idem for an independent transfer of specific goods, nor did they vest exclusive user rights in the tenants. The arrangement was therefore not divisible into a separate taxable sale of goods component on the basis adopted by the revenue authorities.

Conclusion: The transactions were held to arise from a contract of service and not from a deemed sale.

Final Conclusion: The impugned tax demands and affirming orders were set aside, and the batch of writ petitions and the tax revision case were allowed.

Ratio Decidendi: A tax on the transfer of the right to use goods arises only when the transferee obtains identifiable goods with effective, exclusive control and legal right to use them; where the arrangement is for common amenities or incidental facilities retained under the landlord's control, it is not a deemed sale.

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