1985 (8) TMI 180 - HC - Income Tax

Contract Carriage stage carriage Motor Vehicles Act, 1939 Held that (1) The definition of contract carriage under section 2 (3) of the Act is plain and the language is not so elastic and wide so as to bring within its sweep a situation never intended by the Legislature. (2) The dominant factor under the definition that determines whether a transport vehicle is used as a contract carriage or as a stage carriage is whether the vehicle is hired as a whole for a fixed or agreed sum under a prior contract, express or implied, by a single person or party with the owner of the vehicle. . (3) If once a single contract is entered into expressly or impliedly for the use of the vehicle as a whole, from the mere fact that the leader of the contracting party or one of the persons in the party collected fares from the passengers, which is very often in vogue, the vehicle cannot be said to have been used as a stage carriage. . (4) If there was no single contract with the owner in respect of the vehicle and if no person or leader of the party could exercise full control over the vehicle and several passengers had separately contracted for the use of the vehicle and paid individual fares, the transport vehicle used in such manner falls within the definition of stage carriage and not contract carriage , . (5) Tax is levied on the basis of the use of the transport vehicle and not on the nature of the permit held by the owner in respect of the vehicle and the power contained in section 3 read with section 4 of the Taxation Act is sufficient to enable the State Government to levy the tax from time to time when the nature of the use of the vehicle is changed and the class of the motor vehicle is thereby altered, and. (6) There is no prohibition in the Act for the levy and collection of tax as authorised under section 3 (1) of the Taxation Act in cases where action is taken for the breach of any of the conditions of the permit against the holder of the permit under section 60 of the Act. The two actions are quite different - one for the user of the vehicle and the other for the breach of the conditions of the permit. .

Summary

Issues Involved:
1. Classification of a 'contract carriage' as a 'stage carriage' under the Motor Vehicles Act, 1939.
2. Requirement of a valid permit for levying tax as a stage carriage.
3. Interpretation of relevant statutory definitions and provisions.
4. Judicial precedents on the classification of transport vehicles.
5. Levy of tax based on the use of the vehicle.
6. Distinction between actions for breach of permit conditions and tax levy.
7. Right of appeal against levy of tax.

Detailed Analysis:

1. Classification of a 'Contract Carriage' as a 'Stage Carriage':
The primary issue is when a 'contract carriage' is deemed to be used as a 'stage carriage' to attract the higher rate of tax under the Andhra Pradesh Motor Vehicles Taxation Act, 1963. The court emphasized that the distinction lies in the nature of the contract and the use of the vehicle. A 'contract carriage' is hired as a whole for a fixed sum under a prior contract, whereas a 'stage carriage' collects separate fares from individual passengers. The dominant factor is the actual user of the vehicle, not the permit held.

2. Requirement of a Valid Permit for Levying Tax as a Stage Carriage:
The court examined whether a valid permit to ply as a stage carriage is necessary for tax levy. It concluded that the nature of the vehicle's use, not the permit, determines the tax liability. The tax is levied based on the use of the vehicle as a stage carriage, irrespective of the permit held by the owner.

3. Interpretation of Relevant Statutory Definitions and Provisions:
The court scrutinized definitions under the Motor Vehicles Act, 1939:
- 'Contract Carriage' (Section 2(3)): A motor vehicle hired as a whole for a fixed sum without picking up or setting down passengers en route.
- 'Stage Carriage' (Section 2(29)): A motor vehicle carrying passengers for hire at separate fares, either for the whole journey or stages of the journey.
The court emphasized that the definitions are clear and not elastic enough to include unintended situations.

4. Judicial Precedents on the Classification of Transport Vehicles:
The court referred to several judicial precedents:
- In W.P. No. 6127 of 1970 and W.A. No. 131 of 1972, it was held that a contract carriage must be hired as a whole for a fixed amount.
- The Supreme Court in Roshan Lal v. State of U.P. distinguished between contract and stage carriages based on prior contracts and the right to pick up passengers en route.
The court disagreed with the Division Bench's view in W.P. No. 3714 of 1982, which suggested that picking up passengers en route is essential for a vehicle to be classified as a stage carriage.

5. Levy of Tax Based on the Use of the Vehicle:
The court clarified that tax is levied based on the use of the vehicle, not the permit. Section 3 of the Taxation Act empowers the State Government to levy tax on motor vehicles based on their use. The court cited the Full Bench decision in Y. Peda Venkaiah v. Regional Transport Officer, Nellore, which upheld the levy of tax based on the vehicle's use, irrespective of the permit.

6. Distinction Between Actions for Breach of Permit Conditions and Tax Levy:
The court distinguished between actions for breach of permit conditions under Section 60 of the Motor Vehicles Act and the levy of tax under Section 3(1) of the Taxation Act. The two actions are different: one addresses permit breaches, and the other concerns the vehicle's use.

7. Right of Appeal Against Levy of Tax:
The court acknowledged the absence of a right of appeal against the levy of tax based on the change in the vehicle's use. It suggested that Section 12 of the Taxation Act should be amended to provide a right of appeal for aggrieved persons.

Conclusion:
1. The definition of 'contract carriage' is clear and not elastic.
2. The dominant factor is whether the vehicle is hired as a whole for a fixed sum under a prior contract.
3. Collection of individual fares by the leader of a contracting party does not make the vehicle a stage carriage.
4. A vehicle used without a single contract and with individual fares is a stage carriage.
5. Tax is levied based on the use of the vehicle, not the permit.
6. There is no prohibition on levying tax while taking action for permit breaches.
7. An amendment to Section 12 of the Taxation Act is suggested to provide a right of appeal.

The writ petitions were dismissed with costs, and the request for leave to appeal to the Supreme Court was rejected.