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Commissioner Trade Tax U P Lucknow v/s Varansi Auto Sales P Ltd

    Trade Tax Revision Nos. 505 and 506 of 1995

    Decided On, 24 January 1996

    At, High Court of Judicature at Allahabad

    By, THE HONOURABLE MR. JUSTICE M.C. AGARWAL

    For the Appearing Parties: -----------



Judgment Text

M.C. AGARWAL, J.


These two revision petitions under section 11 of the U. P. Trade Tax Act are directed against two orders dated March 24, 1995, passed by the Trade Tax Tribunal, Varanasi, in dealer's Second Appeal Nos. 707 of 1994 for the assessment year 1990-91 and 706 of 1994 for the assessment year 1989-90.


The respondent is an automobile dealer. Apart from outright sales, it also made certain sales on hire-purchase basis. The dispute in these revision petitions is only about the hire charges received by the dealer-respondent in the two years in respect of the vehicles supplied to the customers on hire-purchase basis.


The assessing officer took the view that the amounts in question were received by the dealer for the transfer of the right to use the vehicles by the prospective buyers and, therefore, the amounts so received were taxable in terms of section 3-F of the Act. The learned Tribunal held that the transactions in question were of hire-purchase and the motor vehicles sold were registered in the names of the purchasers and the amounts received in respect of the instalments payable by the customers could not be taxed under section 3-F of the Act.


I have heard the learned Standing Counsel Sri B. K. Pandey and Sri Bharat Ji Agrawal, learned counsel for the respondent.


The definition of "sale", as amended by the U. P. Act No. 25 of 1985 with effect from February 2, 1983, includes within its scope the following types of transactions :


" (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration,


(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract,


(iii) the delivery of goods as hire-purchase or any system of payment by instalments,


(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration,


(v) the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration, and


(vi) the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration. "


Thus, sale of goods in a system of hire-purchase or any system of payments by instalments amounts to sale and such a transaction has to be taxed when the goods are sold by that system. What the assessing officer, however, tried to tax was the hire charges received by the dealer from the purchasers. For this, he invoked section 3-F the relevant portion of which, as amended by the U. P. Act No. 31 of 1995 with effect from September 13, 1985, stands as under :


" 3-F. Tax on the right to use any goods or goods involved in the execution of works contract.- (1) Notwithstanding anything contained in section 3-A or section 3-AAA or section 3-D but subject to the provisions of sections 14 and 15 of the Central Sales Tax Act, 1956, every dealer shall, for each assessment year, pay a tax on the net turnover of -


(a) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; or


(b) transfer of property in goods (whether a goods or in some other form) involved in the execution of a works contract,


at such rate not exceeding fifteen per centum as the State Government may, by notification, declare and different rates may be declared for different goods or different classes of dealers. "


This section, on the very face of it, could not apply to the hire charges received under a contract of hire-purchase. The very title of section 3-F mentions that it relates to tax on the right to use any goods or goods involved in the execution of a works contract. There is no question of a works contract in respect of a sale of an automobile under hire-purchase system or a system of payment by instalments. Then sub-clauses (a) and (b) of sub-section (1) of section 3-F as reproduced above, shows that they covered cases of sale, as mentioned in clauses (iv) and (ii) respectively in the definition of "sale" contained in section 2 (h) of the Act. The sale under hire-purchase agreement being included in the definition of "sale" under section 2 (h), can directly be assessed under section 3 and the whole amount of the consideration for sale becomes taxable immediately the transaction is entered into, that is, the vehicle is supplied to the customer. There is no question of taxing subsequently

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the instalments received by the seller which are usually described as hire charges. Section 3-F does not contain anything that may show that it can be attracted to cover a case falling under clause (iii) of the definition of "sale". For the above reasons, I find no legal error in the Tribunal's order in holding that the hire charges received by the dealer-respondent were not taxable under the U. P. Trade Tax Act. The revision petitions, therefore, have no force and are hereby dismissed with costs. Petitions dismissed.
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