2014 (9) TMI 248 - HC - VAT and Sales Tax

Taxability of goods - Possession of goods by lessor - situs of sales - Held that - Tribunal has not recorded any findings of fact with regard to the existence of the goods although the agreements entered into between the revisionist on one hand and the lessee were before the Tribunal and therefore, if the finding had been recorded by the Tribunal to that effect, the law laid down by the Supreme Court in the case of 20th Century Finance Corporation Ltd. (2000 (5) TMI 980 - SUPREME COURT OF INDIA) would have squarely applied to the facts of the present case and the only inference which could have been drawn by the Tribunal would be that the first two agreements between the lessor on one hand and Rajinder Steels and others and the revisionist-lessor on the one hand and M/s. Sakura Seimitsu India Ltd. At Delhi on the other hand had been executed at Bombay and Delhi respectively and in both the cases the Schedule in no unmistakable terms demonstrated that the goods existed at Kanpur and NOIDA respectively and therefore the situs of sale would be outside the State of U.P. and no Trade Tax could have been levied on the goods merely because the goods were in the State of U.P. Even otherwise so far as the existence of the goods within the State of U.P. at Kanpur or at NOIDA is concerned it may be stated that the Tribunal has not recorded any finding of fact although it has noticed the existence of the two agreements entered into between the revisionist and the lessee. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of the Trade Tax Tribunal regarding levy of sales tax on leasing agreements.
2. Determination of the situs of sale for tax purposes based on the location of goods.
3. Interpretation of legal principles governing the transfer of right to use goods in inter-state transactions.

Analysis:

1. The revisionist, a financial lessor, challenged the Trade Tax Tribunal's order regarding the levy of sales tax on leasing agreements for equipment. The Tribunal partially allowed the appeal and remitted the matter to the Assessing Authority for further examination. The revisionist contended that the agreements were executed outside the State of U.P., thus the situs of sale would be outside the state, making it not liable for Trade Tax in U.P.

2. The revisionist argued that the location of goods in the agreements, one at NOIDA and the other at Kanpur, indicated the existence of goods and their inspection by the lessee. Citing legal precedent, the revisionist emphasized that the situs of sale for tax purposes should be where the contract is executed, not where the goods are located. The Supreme Court's ruling highlighted that the transfer of right to use goods occurs when a contract is executed, determining the situs of sale based on the contract location.

3. The Tribunal failed to record findings on the existence of goods despite the agreements being presented. Consequently, the High Court quashed the Tribunal's order and referred the matter back to the Assessing Authority for re-examination. The Assessing Authority was directed to determine the existence of the Hire Purchase Agreement and assess if any inter-state sale took place, ensuring a fair opportunity for the revisionist to present their case.

By allowing the revisions and providing detailed legal analysis, the High Court clarified the principles governing the taxation of leasing agreements and emphasized the importance of determining the situs of sale based on contractual execution rather than the location of goods. The judgment highlighted the need for factual findings to support legal conclusions, ensuring a thorough examination of all relevant aspects in tax disputes involving inter-state transactions.