2013 (10) TMI 1018 - HC - VAT and Sales Tax

Transfer of right to use the goods - Exigible to sales tax - Whether hiring of cinematographic equipments would amount to transfer of right to use the goods for cash, exigible to sales tax under Section 3-A of the Tamil Nadu General Sales Tax Act, (in short, TNGST Act )? Held that - Whether a transaction is a transfer of right to use goods or a service is essentially a question of fact, which has to be determined in each case, having regard to the terms of the contract. As pointed out earlier, in the present case, the assessee(s) have not produced any document/agreement to show that the assessee(s) retained possession and control over the Cinematographic equipments leased out. In the absence of any material evidence, we find no sufficient reasons to upset the concurrent findings recorded by the authorities and the Tribunal and questions of law are answered accordingly - Following decision of M/s. Anand Cine Services Versus The State of Tamil Nadu 2013 (5) TMI 540 - MADRAS HIGH COURT - Decided against assessee.

Summary

Issues:
1. Whether there is a transfer of right to use the cinematographic cameras as per the terms and conditions put forth in the agreement to attract tax levy under Section 3-A of the TNGST Act?
2. Whether the Tribunal was correct in holding that there is a transfer of right to use the cameras when the ownership right over the camera was only with the petitioner and only implied possession vested with the lessees?
3. Whether the claim of deduction under Section 3A(2)(b) of the Act is valid based on the available evidence?

Analysis:

Issue 1: The case involved Tax Case Revisions filed by the assessee against the order of the Tamil Nadu Sales Tax Appellate Tribunal for the assessment years 1999-2000 and 2000-01. The petitioner was engaged in printing and processing cinematographic films and leasing cinematographic cameras and other equipment. The dispute centered around whether there was a transfer of the right to use the cameras, attracting tax under Section 3-A of the TNGST Act. The Assessing Officer initially rejected the assessee's contention, leading to an appeal before the Appellate Assistant Commissioner, who ruled in favor of the assessee. However, the Revenue challenged this decision before the Tribunal. The Tribunal analyzed the agreement and concluded that the hire charges were for leasing cameras to the lessee (producer), who had effective control and derived economic benefits during the lease period. Consequently, the Tribunal held that the transaction was liable to be assessed under Section 3-A of the Act.

Issue 2: The Tribunal also addressed the question of ownership and possession of the cameras. Despite the ownership right being with the petitioner, the Tribunal found that the lessee (producer) had possession and effective control over the cameras during the lease period, allowing them to exploit the economic benefits. This led the Tribunal to reject the assessee's claim that there was no transfer of the right to use, thereby upholding the applicability of Section 3-A of the Act based on the control and possession dynamics.

Issue 3: Regarding the claim of deduction under Section 3A(2)(b) of the Act, the Tribunal highlighted the lack of evidence regarding the origin of the purchased equipment. Without sufficient proof that the hired equipment was locally purchased or imported, the Tribunal dismissed the claim for deduction. The assessee, aggrieved by this decision, filed a revision.

The High Court, in its judgment, upheld the Tribunal's findings, stating that there were no justifiable grounds to deviate from the Tribunal's decision. Referring to a similar case, the Court confirmed the order of the Tribunal and dismissed the Tax Case Revisions, aligning with the Division Bench's decision in a previous case. Consequently, the Court rejected the plea of the assessee, emphasizing the importance of possession and control in determining the applicability of tax laws.