2006 (8) TMI 602 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the transactions between the dealer and IIT Kanpur and Hindustan Aeronautics Limited constituted a "transfer of right to use" the vehicles under Section 3-F of the U.P. Trade Tax Act.
2. Examination of the terms and conditions of the agreements to determine the control and possession of the vehicles.
3. Analysis of relevant case law to interpret "transfer of right to use."

Issue-Wise Detailed Analysis:

1. Whether the transactions constituted a "transfer of right to use" the vehicles under Section 3-F of the U.P. Trade Tax Act:

The revision under Section 11 of the U.P. Trade Tax Act challenges the Tribunal's order regarding the assessment year 1990-1991. The Assessing Authority had levied tax on the amount received by the dealer under Section 3-F, treating the transactions as a transfer of rights to use the goods. The Tribunal, however, rejected the appeal, holding that the dealer provided vehicles for transportation while retaining possession, thus not constituting a transfer of right to use.

2. Examination of the terms and conditions of the agreements:

The agreements with IIT Kanpur and Hindustan Aeronautics Limited were scrutinized. The dealer provided buses for transportation, bearing all expenses and responsibilities, including fuel, maintenance, insurance, and wages. The control and superintendence of the vehicles remained with the dealer, as specified in the agreements. For instance, Clause 15 of the IIT Kanpur agreement stated that the plying of the bus was under the institute's control, yet the dealer's personnel had to follow the institute's directions. Similarly, the Hindustan Aeronautics Limited agreement required the dealer to provide buses and bear all associated costs, with the company having no responsibility for accidents or damages.

3. Analysis of relevant case law:

The court referred to several precedents to interpret the "transfer of right to use":

- Kando Transport v. S.T.O. Assessment Unit, Barbil: The Orissa High Court held that if the control, custody, and possession of the vehicle remain with the owner, there is no transfer of the right to use.
- Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer: The Andhra Pradesh High Court concluded that effective control of machinery by the owner, even while used by the contractor, does not constitute a transfer of the right to use.
- M/s Ahuja Goods Agency v. State of U.P.: The Division Bench held that without the transfer of possession, there is no transfer of the right to use.
- Bharat Sanchar Nigam Ltd. v. Union of India: The Supreme Court emphasized that the essence of the right to use goods involves the user of goods, and delivery of possession is essential.

Conclusion:

The court concluded that the effective control over the vehicles remained with the dealer, and there was no transfer of right to use under Section 3-F of the Act. The agreements indicated that the dealer bore all operational responsibilities and risks, maintaining control over the vehicles. Therefore, the transactions did not constitute a transfer of right to use, and the tax levied under Section 3-F was not applicable. The revision was dismissed, affirming the Tribunal's decision.