2009 (7) TMI 1381 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of Section 3-F of U.P. Trade Tax Act regarding tax liability on amount received by bus owners from UPSRTC for providing buses.

Summary:
The case involved nineteen revisions under Section 11 of U.P. Trade Tax Act challenging the orders of the Tribunal on the common question of law regarding the tax liability of bus owners who entered into a contract with UPSRTC to provide buses. The Assessing Authority had levied tax on the amount received by the bus owners, treating the transactions as transfer of right to use the buses. The Deputy Commissioner (Appeals) and the Tribunal held that ownership of the vehicles remained with the bus owners, and thus the amount received was not liable to tax under Section 3-F of the Act.

Upon examination of the agreement between the parties, it was found that the possession and effective control of the buses during the contracted period were with UPSRTC. The clauses of the agreement clearly indicated a transfer of right to use the buses from the bus owners to UPSRTC. The Tribunal's decision did not consider these relevant clauses of the agreement, leading to an erroneous judgment.

In light of previous legal precedents, including the Constitution Bench decision in the case of BSNL and Others vs. Union of India, it was established that for a transaction to constitute a transfer of the right to use goods, the goods must be available for delivery, there must be consensus on the identity of the goods, and the transferee should have a legal right to use the goods. The agreement in this case fulfilled these criteria, indicating a transfer of right to use the buses to UPSRTC.

The Court also distinguished a previous decision where the possession and effective control over the bus were not transferred to UPSRTC, as the terms of the agreement were different from the present case. Consequently, all the revisions were allowed, the orders of the Tribunal and the First Appellate Authority were set aside, and the order of the Assessing Authority was restored.