TaxTMI 
TaxTMI 
1989 (2) TMI 399
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....ale price despite the contention that the extra charges recovered were not as interest but as hire-charges? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the rate of interest may be taken on the same basis which has been adopted during these years by the assessing authority without making an enquiry as to actual rate of interest in the market? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing that: (a) the initial payment should be included in the amount on which depreciation is to be allowed? and (b) the registration fee and insurance charges should not be included in the basic price for calculation of taxable turnover? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in interpreting the decision of the Honourable Supreme Court in the case of K.L. Johar [1965] 16 STC 213 in holding that the sale price in respect of hire-purchase transactions on the maturity of the transactions would be the original price/basic price plus interest thereon for half the period of delayed payment? 2.. The assessee, M/s. Centr....
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....he sale did not materialise; and (iv) the legal charges in the event of default of payment in instalment which could be estimated at Rs. 1,000. Accordingly he worked out the price at Rs. 21,268 and made the fresh assessments. This estimated price was less than the original price of the vehicle, i.e., Rs. 25,500, but more than the price of Rs. 14,750 worked out after allowing depreciation. The assessee preferred appeals before the Deputy Commissioner of Sales Tax, who partly accepted the assessee's contention by holding that the registration and insurance charges and other expenses should be included in the original price and thereafter the initial payment should be deducted, finance charges should then be added and on the total amount thus worked out, depreciation should be deducted. Thereafter initial payment should be added to get the sale price at the time of maturity of sale. Accordingly the assessments were modified. 4.. As regards assessment years 1965-66 and 1966-67, the assessing authority worked out the sale price by deducting hire money from the total price which included basic price and finance charges. Hire money was worked out on the basis of interest at 9 per....
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....ption to purchase was exercised. It was further held that the depreciation value on the date of sale should be deducted from the dealer's price with interest on account of late payment. Having regard to the difficulty in calculating the interest, it was directed that the interest should be calculated o n the principal amount for half the period of payment on the basis of rate of interest adopted by the assessing authority during the assessment years. With these directions, the cases were remanded to the assessing authority. Being aggrieved, the assessee and the Revenue simultaneously applied for making references under section 44 of the State Act and this is how the aforesaid questions of law were referred to this Court by the Tribunal. 7.. Shri B.L. Nema, the learned counsel for the assessee, submitted that the Tribunal misconstrued the decision of the Supreme Court in Johar's case [1965] 16 STC 213 and consequently came to wrong conclusions by holding that the depreciation value of the vehicle on the date of sale should be deducted from the dealer's price with interest on account of late payment. It was urged that in Premraj Ganpatram [19741 33 STC 159, the Gujarat High Cou....
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.... a future date to purchase the vehicle at a nominal price. If the first part is determined the rest would be towards the payment of price. The first part may be determined after finding out the proper amount to be paid as hire in the market for a vehicle of the type concerned, or in such other way as may be available to the sales tax authorities. The second method may be to take the original price fixed in the hire-purchase agreement and to calculate the depreciation and all other factors that may be relevant in arriving at the price when the second sale takes place to the hirer including the condition of the vehicle at the time of the second sale." In the present case, the Tribunal adopted the second method suggested by the Supreme Court. It appears that while adopting the second method suggested by the Supreme Court, the Tribunal took interest for late payment, besides depreciation as a relevant factor for arriving at the price when the second sales took place. We are of the view that the Tribunal was not right in considering interest on account of late payment as a relevant factor for arriving at the price when the second sale took place. The reason is furnished in the typica....
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....ng agency or the hirer had agreed to purchase the vehicle from the original dealer". It further held that "the Tribunal was justified in determining the sale price in the case of hire-purchase transactions, as the hire-purchase value, which is composed of the real price of the vehicle and the amounts of interest on that price, finance service commission and extra interest for late payment of hirepurchase instalments". With due respect, we find ourselves unable to agree with the conclusions of the Gujarat High Court. For the reasons stated earlier, we are of the view that besides the real price of the vehicle, hirepurchase value of it cannot consist of the amounts of interest on real price, finance service commission and extra interest for late payment of hirepurchase instalments. Similarly the deduction on account of depreciation cannot be made from the entire hire price agreed upon between the parties under the hire-purchase agreement. It must be from the original price of the vehicle at which the hirer had agreed to purchase the vehicle. 10.. In the light of the view we are taking, we are of the view that question No. (ii) referred to us by the Tribunal does not require any an....