TaxTMI 
TaxTMI 
2000 (8) TMI 1013
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....nts with hirers for the purpose of enabling the hirers to obtain a vehicle. The normal term of the agreement entered into between a hirer and the appellant contemplates a vehicle being purchased by the appellant and the said vehicle is then taken by the hirer on hire-purchase basis. The terms of the agreement provide that on the execution of the hire- purchase agreement an initial amount is paid by the hirer by way of premium for granting a lease and thereafter regular instalments are required to be paid. The amount which is paid by the hirer would include the price of the vehicle and the hire charges. As and when all the instalments are paid, the hirer is given an option to obtain the ownership of the vehicle on the payment of a nominal amount. On the payment being so made, the vehicle is transferred in the name of the hirer. 3.. As already indicated above, the sales tax authorities came to the conclusion that on the correct interpretation of the provisions of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi (hereinafter referred to as "the Act"), as in force at the relevant time, the time being between October 1, 1959, and the coming into f....
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....to be a sale: Explanation 2.-A sale shall be deemed to have taken place in the State of Delhi if the goods are actually delivered in the State of Delhi as a direct result of such sale for the purpose of consumption in the State of Delhi, notwithstanding the fact that under the general law relating to the sale of goods the property in the goods has by reason of such sale passed in another State." Under the Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi. After 1-10-1959: "2(g) 'Sale' with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods. Explanation.-A sale or purchase of goods shall be deemed to take place inside the Union Territory of Delhi if the goods are within that territory- (i) in the case of specific or ascertained goods, at the time the contract of sale is made; and (ii) in the case of unascertained or future goods, at the time of th....
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....on of the word "sale", this Court observed that the transaction in question partakes of the nature of a contract of bailment with an element of sale. It held that the definition in section 2(g) included not only what was compendiously described as a sale under the Sale of Goods Act, but also transactions, which, strictly speaking, are not sales, not even contracts of sale but only contain an element of sale which is the option to purchase and that is why the explanation to section 2(g) ended with the words "be deemed to be a sale", thereby indicating that a legal fiction has been introduced into the concept of sale as ordinarily understood. It was clarified that the explanation included within its amplitude a mere transfer of goods without the transfer of title to the goods if it was in the course of an agreement of the nature of hire-purchase. 7.. While explaining the nature of the hire-purchase agreement, the court took note of the fact that in such an agreement, the hirer may not be bound to purchase the thing hired. It was observed as follows: "It is clear that under the law, as it now stands, which has now been crystallised into the section of the Hire Purchase Act, quot....
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....not strictly speaking a sale, the said law was discriminatory against the traders in Delhi as such a law has not been made applicable to whole of India. This contention was rejected firstly on the ground that it had not been averred that other Part "C" States had not been similarly treated, but what is important for our purposes in the present case, the court took note of the fact that under the Central Sales Tax Act, the definition of the word "sale" contained the extended definition as in the Delhi Act without the non obstante clause. Section 2(g) of the Central Sales Tax Act, 1956, to which reference was made reads as follows: " 'Sale', with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods." After referring to the same, the court observed as follows: "It would thus appear that hire-purchase transactions have been included within the definition of "sale" ....
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....s sought to place reliance on the second case of the Instalment Supply Co, entitled Instalment Supply Ltd. v. Sales Tax Officer, Ahmedabad-I [1974] 34 STC 65 (SC); [1975] 1 SCR 386. That was a case where the State of Gujarat in the case of a hire-purchase agreement between the hirer and the Instalment Supply Co., sought to tax the sale of the vehicle when the hirer exercised his option to purchase the same. At that time the goods were inside the State of Gujarat. The Gujarat Act, being a State enactment, did not enable that State to tax transfer of goods on hire-purchase but tax was sought to be levied at the time when the hirer had exercised his option to obtain the ownership of the vehicle. This Court dealt at length with the meaning of a hire-purchase agreement. It observed that at common law the term hire- purchase properly applied to contracts of hire conferring an option to purchase, but it was often used to describe the contracts which were in reality agreements to purchase chattels by instalments subject to a condition that the property in them is not to pass until all instalments have been paid. It recognised the difference between two types of agreements-first where, as i....
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.... definition is, in effect, the same as the one in the Gujarat Act. Therefore, the type of transactions which were subjected to tax in the earlier Instalment Supply case [1961] 12 STC 489 (SC); [1962] 2 SCR 644 will not be subject to taxation after this amendment and the problem of the same transaction being subjected to taxation at two different stages will not arise." 14.. Learned Senior Counsel submits that by equating the two provisions of the Acts, we must give to the Sales Tax Act applicable in Delhi after 1st October, 1959, the same meaning as was given to the Gujarat Act. 15. It appears to us that the aforesaid observations were by way of an obiter. This Court was not called upon to consider the effect of the amendment made to the Delhi Act in 1959. This Court was only concerned with a question whether the State of Gujarat could levy any sales tax at the time when the hirer exercises his option to purchase the vehicle which happened to be in Gujarat at the time when the option was so exercised and despite the fact that sales tax had already been paid on the hire-purchase transaction in Delhi earlier. The observations quoted above were merely to the effect that a....
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.... [1965] 16 STC 213 (SC) ; [1965] 2 SCR 112, would have clearly been applicable, the hire-purchase agreement itself would have been taxable and tax could have been levied only at that time when the option was exercised. This definition of the word "sale", the first part of which is in pari materia with the Sale of Goods Act, was expanded so as to include a transfer of goods on hire-purchase or other system of payment by instalments. In the latter portion, in order that the tax is levied there is no requirement that the property in goods should be transferred. What is required is transfer of goods, unlike the first part of this definition which requires transfer of property in goods. The reason for this is very obvious. In the case of hire-purchase, there are two elements, namely, that of bailment and an element of sale and when a hire-purchase agreement is entered into there is transfer of goods on hire-purchase which would not include, at that point of time, any transfer of property in the said goods. If the contention of the learned Senior Counsel for the appellants is accepted, the effect of that would be that the latter portion of the definition could be otiose. If the def....