LexM/S. GOA CARBON LTD. versus COMMISSIONER OF TRADE TAX
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A B [2008] 3 S.C.R. 602 MIS. GOA CARBON LTD. v. COMMISSIONER OF TRADE TAX (Civil Appeal No. 1660 of 2008) FEBRUARY 28, 2008 [S.H. KAPADIA AND 8. SUDERSHAN REDDY, JJ.] Uttar Pradesh Trade Tax Act, 1948: s.3F - Transaction of transfer of right to use - Supply of plant and machinery on c lease - Receipt of lease rent - Taxability of - Held, on facts, taxable in terms of s.3-F as it was local sale. Assessee was engaged in the business of leasing and financing plants and machinery. While examining the case for the assessment year 1994-95, 1995-96 and 1996- D 97, the Department noticed that assessee supplied plant and machinery to KE Ltd, U.P. on lease and in return received lease rent. The assessing officer issued show cause notice under s.3F of U.P. Trade Tax Act, 1948 and thereafter when assessee did not reply passed the E assessment orders imposing tax on lease rent received by the assessee, which was confirmed by the Deputy Commissioner (appeal). On appeal, Tribunal remanded the matter to Assessing Officer. On remand, the Assessing Officer observed that in the lease agreement, there was a F warranty clause which indicated that KE Ltd. had selected the equipment which were leased out to it prior to its purchase by the assessee. In view of these clauses in the lease, the assessee was called upon to produce agreement/agreement pursuant to which equipment G stood purchased. Assessee failed to produce such agreement. The Assessing Officer also noticed an invoice under which the assessee had purchased machinery in which there was reference to the purchase order which indicated that the equipment was purchased from Punjab H 602 M/S. GOA CARBON LTD. v. COMMISSIONER OF 603 TRADE TAX under an arrangement prior to lease agreement executed A at Mumbai. Assessing Officer found that this was an after thought to earmark the transaction as an outside sale. This finding was upheld by Deputy Commissioner (appeal). It was held that movement of equipment cannot be said to have taken place from ex U.P. place to U.P. in B pursuance of lease. It was also held that the letter of intent dated 29.10.1991 was not part of the lease. The concurrent findings were affirmed by the Tribunal. High Court also dismissed the revisions. Hence the present appeal. Dismissing the appeal, the Court C HELD: 1. In cases falling under s.3F of the U.P. Trade Tax Act, 1948 the subject-matter of taxation is transfer of right to use goods and, therefore, it is unnecessary to deal with the question of delivery of possession which is 0 related to situs. Therefore, in this case the place where the right to use is transferred is relevant and not place of delivery which may be relevant in case of oral contracts to determine the situs. In cases under s.3F, the subject- matter of taxation is transfer of right to use and, therefore, place where such right is transferred assumes E importance. Hence, the place at which the contract is executed is relevant. [Para 9] [607-D, E, F] 2. According to assessee, the Letter of Intent was the .,. contract which existed on 29.10.91. However, the said F Letter does not indicate the place, namely, Mumbai. This Letter of Intent was produced for the first time after 12 years by the assessee. No explanation has been given for not producing the said letter earlier, particularly, when the Department had repeatedly called upon the assessee G to produce any agreement/arrangement prior to the lease and pursuant to which the Purchase Orders dated 28.11.91 were placed by the assessee. Moreover, in the _., invoice dated 26.2.92, KE Ltd. is described as lessee. On that date there was no lease. The lease has been executed H 604 SUPREME COURT REPORTS [2008] 3 S.C.R. A only on 24.3.92. Taking i11oto account the aforesaid ~ • circumstances, the Letter of Intent produced after 12 years cannot be relied upon in support of the assessee's case that there was a prior agreement/arrangement even before 24.3.92 pursuant to which the equipment stood B purchased. From the above circumstances it is clear that the Letter of Intent is executed not for commercial purposes but to evade the tax and consequently it cannot be said that the impugned transaction was an outside sale. The entire arrangement was got up in order to project c the impugned transaction as an outside sale so that the said transaction does not come within the ambit of s.3F of the 1948 Act. [Para 10-11] [607
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