TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 336
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.... and earlier under the Tamil Nadu General Sales Tax Act. The Assessing Officer passed individual assessment orders in respect of the relevant assessment years levying tax and penalty on the transactions relating to import-lease, inter-State lease and lease receipts for the lease agreements entered prior to 1.4.1986. Aggrieved by such assessment orders, the assessee preferred appeal before the Appellate Assistant Commissioner. 3. The First Appellate Authority by common order dated 28.9.2000 and 16.10.2000, set aside the assessment and remanded the case back to the Assessing Officer for fresh consideration on the ground that at the time when the Assessing Officer passed the assessment order, the Judgment of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra reported in 119 STC 182 was not before the Assessing Officer. There was a further direction to the Assessing Officer to verify the nature of transaction in each case with reference to the details and documents produced by the assessee in support of their claim and decide the liability or otherwise of the transactions, applying the legal principles laid down by the H....
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.... the lessor and the customer as lessee who were very much in the picture before the commencement of the transfer of the leased goods to the business place of the lessee. Before the First Appellate authority, the assessee claimed exemption under section 3A(2)(a) of the Tamil Nadu General Sales Tax Act, in respect of import-lease and inter-State lease by placing reliance on the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra reported in 119 STC 182. In so far as the lease receipts pertaining to agreements entered into prior to 1.4.1986, it was contended that in the absence of charging section for levy of tax on transfer of right to use goods, prior to 1.4.1986, those transactions are not liable to tax. 7. The First Appellate Authority, by common order dated 30.9.2005 passed for the assessment years 1986-87 to 1996-97 set aside the levy of tax on the import-lease transactions and inter-State lease transactions and remanded the matter to the Assessing Officer for fresh consideration to consider the documents filed by the asssessee in respect of the transactions entered prior to 1.4.1986 thereby, setting asi....
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....bmitted that the Sales Tax Appellate Tribunal over looked the fact that the taxable event under Section 3A of the Tamil Nadu General Sales Tax Act was transfer of the right to use goods and not exercise of the right by usage of the goods taken on lease or the payment of the lease amount. It is further submitted that in respect of transactions prior to 1.4.1986, the goods identified by the lessee prior to the agreement were moved from other States pursuant to the agreement directly to the lessees as by way of inter-State sales and the State Government has no authority to levy tax on such inter-State movement. In support of his contentions, the learned counsel relied on the decision of the Andhra Pradesh High Court in the case of I.T.C.Classic Finance and Services Vs. Commercial Taxes reported in 1997 STC 330, affirmed by the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra reported in 119 STC 182 and the decision of the Kerala High Court reported in (2007) 6 VST 805 (Ker) in the case of First Leasing Company of India Ltd Vs. State of Kerala. Learned counsel appearing for the assessee in order to demonstrat....
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....ements entered prior to 01.04.1986 is liable for tax under Section 3A of the TNGST Act is contrary to the law laid down by the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Ltd Vs. State of Maharashtra reported in 119 STC 182 ?" 13. We have heard the learned counsel appearing on either side and perused the records including the copies of the agreements and other documents pertaining to the nature of transactions between the assessee, foreign supplier and the lessee. 14. From a perusal of the records, it is seen that the assessee has entered into two types of transactions namely import-lease transactions and inter-State lease transactions. In respect of these transactions, the assessee seeks to draw a distinction in respect of lease receipts on lease agreements entered prior to 1.4.1986 and in respect of lease receipts on lease transactions after 1.4.1986 by contending that as a consequence of the 46th Amendment to the Constitution of India, the States were empowered to levy tax also on the transfer of right to use goods though there is no sale of the goods by a transfer of the property over them. Tax on such transaction was first levied in the State of Tam....
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..... 17. The Hon'ble Supreme Court in the case of 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra reported in 119 STC 182 held that the State cannot levy a tax on the transfer of the right to use goods on the basis that one of the events in the chain of events has taken place within the State. The delivery of goods may be one of the elements of transfer of the right to use, but that would not be the condition precedent for a contract of transfer of the right to use goods. The Hon'ble Supreme Court pointed out that where a party has entered into a formal contract and the goods are available for delivery irrespective of the place where they are located, the situs of such sale would be where the property in the goods passes, namely where the contract is entered into. It was further pointed out that Clause (29A) of Article 366 cannot be read to imply that the tax under sub-clause (d) is to be imposed not on the transfer of the right to use goods, but, on the delivery of the goods for use. It was held that on a plain construction of sub-clause (d) of clause (29A) of Article 366, the taxable event is the transfer of the right to use goods regardless of when or whe....
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.... and lease rental payable each month of the tenure of the lease. The transaction was held to be not exigible to sales tax under the Delhi Sales Tax Act. After amendment to Article 366 of the Constitution inserting clause (29A), the scope for the levy of sales tax expanded and the sale and purchase of goods by fiction of law would include transfer of the right to use goods irrespective of the fact that in leasing transactions, there is no ownership of goods passing from the seller to the buyer. While most of the States amended the definition of the term "sale" in their respective Sales Tax Acts, the Delhi State enacted a separate Act known as Delhi Sales Tax on Right to Use Goods Act, 2002, by virtue of which all lease transaction in which the transfer of the right to use goods had been effected became liable to sales tax. The case of the petitioner before the Delhi High Court is that prior to coming into force of the said enactment, there was no law or any provision in the existing Sales Tax Act providing for a levy of tax on lease transactions. It was argued by relying upon the decision in the case of 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra report....
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....rvice for the purpose of taxation as well, viz., at what point of time "sale" was to be inferred for the purpose of taxation and it was this fiction, that was created under Section 3(b) of the Tamil Nadu General Sales Tax Act as well. Section 3-A of the Tamil Nadu General Sales Tax Act contemplates levy of tax on lease rentals realised for each year in relation to the business of transfer of right to use goods and lease being a continuous transaction and lease rental realised for each year is taxable under Section 3A of the TNGST Act. Therefore, the assessee cannot make out a distinction in respect of agreements entered prior to 01.04.1986 and after 01.04.1986, nevertheless, the assessee could produce documents to establish that the transaction is effected by transfer of documents of title to the goods during their movement from one State to another and to fall within the ambit of Section 3A of the Central Sales Tax Act, 1956 or to bring the same within the scope of the Section 5(2) of the Central Sales Tax Act, 1956, to be a deemed sale to take place in the course of import of the goods into the territory of India and these questions being essentially questions of facts to be dete....
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....ful agreement with the reasoning in the said decision. It is not denied by the assessee that in respect of the transactions entered into post 01.04.1986, the liability on the leasing transactions arises every year. It is not the case of the assessee that merely because the first year of the leasing transactions are assessed under Section 3A of the Tamil Nadu General Sales Tax Act, the second year of lease goes for exemption; for the liability to make the payment for every subsequent years arises under the agreement itself so that the the lease may have the economic benefit of the goods given under the lease. Thus, extending the same principle, for the contracts entered into prior to 01.04.1986, with a clause in the lease agreement requiring the assessee to make the payment every month so that he may have the beneficial possession of the machinery and to keep the agreement alive; once the amendment expands the definition of 'sale' by including leasing transaction as a deemed sale and the charge is created under Section 3A of the Tamil Nadu General Sales Tax Act with effect from 01.04.1986, irrespective of the date of entering into the agreement, the liability to pay tax gets activat....