TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 339
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.... equipment described in Schedule-'A' thereof. The lease agreement gave M/s. Gangeshwar Ltd a right to use machinery owned by the revisionist. The terms of this agreement are stated to have been extended during the assessment year in question. Both the corporate entities thereafter appear to have entered into an arrangement to merge. The revisionist was the Transferor Company while M/s. Gangeshwar Ltd was the Transferee Company. The Scheme of Arrangement was sanctioned by an order of the Court dated 6 March 2000. The "appointed date" under the scheme was stipulated to be 1 October 1997, while the "effective date" was to mean the date when a certified copy of the order passed by the High Court sanctioning the Scheme is filed with the Registrar of Companies. The relevant provisions of the Scheme read thus: "2.5 With effect from the Appointed Date, all debts, liabilities, duties and obligations of the Transferor Company (hereinafter referred to as "the said liabilities"), subject to the changes due to carrying on of the business by the Transferor Company upto the Effective Date in accordance with clause 2.1, shall, pursuant to the Order under Section 394 of the Companies Act,....
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....urther act or deed, stand transferred on the Effective Date from the Transferor Company to the Transferee Company without consideration as a transfer of property from a trustee to a beneficiary." (emphasis supplied) The submission which has found acceptance with the Tribunal on an interpretation of the provisions extracted above was that the transfer of assets would be deemed to have occurred only on the date when the High Court sanctioned the Scheme, meaning thereby the "effective date" and not on the "appointed date". Insofar as the taxability under Section 3-F is concerned what has weighed with the Tribunal is that the moveable machinery items were consigned within the State of U.P. and were also received by the Transferee Company within the State, therefore, justifying a levy of tax under the U.P. statute. Insofar as the question of taxability of molasses is concerned, this may be dispensed at the very outset since learned counsel for the parties do not dispute the fact that during the relevant assessment year an administrative charge was being levied on its sale and purchase of under the U.P. Sheera Niyantran Adhiniyam, 1964 and that therefore there could not have been a l....
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....rms of clause 2.7 which has already been extracted hereinabove. A careful perusal of clause 2.7 clearly establishes that all properties and assets owned, held or acquired and investments made by the Transferor Company on or after the appointed date were for all purposes deemed to have been owned, held or acquired by it as a trustee for the benefit of the Transferee Company. Clause 2.7 further provides that the transfer and vesting of such assets would be effected without any further act or deed except for the order of the High Court sanctioning the same. More fundamentally clause 2.7 provides that this transfer without any further act or deed would be recognized to have come into effect on the "effective date" and not the "appointed date". In view thereof this Court is of the considered opinion that the Tribunal was correct insofar as it holds that the transfer of assets was to came into effect only from the "effective date". Although Sri Agarwal had additionally submitted that there is a lack of an element of sale under a Scheme of Arrangement, this contention too would not merit acceptance in light of the decision of the Supreme Court in Hindustan Lever Vs. State of Maharashtra3.....
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.... contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed." (emphasis supplied) From the above extract, it is clear that for the purposes of a levy of tax under Section 3-F, the presence of machinery within the State is not determinative. The taxable event which stands encompassed under section 3-F must and can only be a transfer of a right to use. The situs of such a transaction can only be the place where this right is transferred and conferred. Admittedly here the transfer of a right to use was effected outside the State of U.P. consequent to the execution of the lease agreement. The essential element of the levy, therefore, occurred outside the jurisdiction of this State. There was no element of a "transfer of a right to use" which occurred within this State. The moment the agreement came to be executed there sprung into existence a transfer of a right to use machinery. Therefore for the purposes of a "tran....
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.... for sale of goods and the other for supply of labour and services and as a result such a contract which was single and indivisible has been brought on a par with a contract containing two separate agreements. Since tax was held as tax on sales of goods, therefore, it was held that principles contained in Section 4 of the Central Sales Tax Act would apply to transaction of works contract as envisaged in clause (29-A)(b) of Article 366. Moreover, the transactions contemplated under Section 4 of the Central Sales Tax Act involve a series of events and for that reason it has no application to the present case. 32. Coming to the question that a transaction in question is in the nature of a contract of bailment, it is true that the High Court of Bombay in the judgment under appeal has taken the view that the transactions of the transfer of the right to use goods are in the nature of bailment. If such a view is taken then the State would not have the power to levy sales tax on such transactions. Unless such transaction is held to be a sale or deemed sale in law, it is only then the State Legislature would be competent to enact law to levy tax under Entry 54 of List II of the Seventh Sc....