2002 (12) TMI 586 - HC - VAT and Sales Tax

Issues Involved:
1. Exigibility to sales tax on rental charges received by the assessee from leasing out computer systems.
2. Assessability of maintenance charges received by the assessee.

Detailed Analysis:

Exigibility to Sales Tax on Rental Charges:
The primary issue in the tax revision cases filed by the assessee was whether the rental charges received from leasing out computer systems to customers in Kerala were liable to sales tax under the Kerala General Sales Tax Act, 1963. The petitioner, a non-resident dealer, argued that the rental income was not liable to be assessed under the Act for three reasons:
1. The agreements with the customers were executed before April 1, 1984, and the relevant amendment to the Act came into force only on that date.
2. The movement of the computer equipment from Maharashtra to Kerala was pursuant to a contract, making it an inter-State trade transaction.
3. The deemed sale took place in Maharashtra when the agreements were executed.

The assessing authority, however, assessed the rental income as turnover exigible to tax under the Act, a decision upheld by the first appellate authority and the Sales Tax Appellate Tribunal. The Tribunal noted that the agreements contained two parts: installation of the equipment in Kerala and leasing it out on a rental basis. It held that the rental income received after April 1, 1984, was taxable under the amended provisions of the Act, as the property in the computer systems remained with the assessee. The Tribunal's decision was based on the extended definition of "sale" under the Act, which included the transfer of the right to use goods.

The assessee contended that the Tribunal's reliance on the Kerala High Court's decision in Deputy Commissioner of Agricultural Income-tax and Sales Tax (Law) v. P.K. Biriyumma was misplaced in light of the Supreme Court's decision in Gannon Dunkerley & Co. v. State of Rajasthan. However, the Tribunal found no merit in this argument, noting that the property in the computer systems did not transfer to the customers and the transactions were not inter-State sales.

Upon reviewing the agreements, the High Court found that the contracts were executed in Maharashtra, but the transfer of the right to use the equipment only occurred upon delivery and installation in Kerala. The Court concluded that the transactions were not inter-State sales and upheld the Tribunal's decision to tax the rental income received after April 1, 1984.

Assessability of Maintenance Charges:
The revisions filed by the department concerned the Tribunal's decision to set aside the assessability of maintenance charges received by the assessee. The revenue argued that the assessee had conceded the taxable turnover for maintenance charges and that the assessing authority had deducted 30% towards labor charges. The new contention regarding the non-liability to tax under the Act was raised by the assessee only before the Tribunal.

The Tribunal had remitted the question of the assessability of maintenance charges to the assessing authority for reconsideration, directing it to ascertain whether any amount received for maintenance should be deducted and to consider the proper books of accounts maintained by the assessee. The High Court found no illegality in the Tribunal's direction and dismissed the tax revision cases filed by the department, allowing the assessing authority to independently consider the issue on merits.

Conclusion:
The High Court upheld the Tribunal's decision that the rental income received by the assessee from leasing out computer systems in Kerala after April 1, 1984, was taxable under the Kerala General Sales Tax Act. It also affirmed the Tribunal's direction to the assessing authority to reconsider the assessability of maintenance charges, allowing for an independent decision on the matter. All revisions filed by the assessee and the department were dismissed.

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