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2015 (2) TMI 705 - HC - VAT and Sales TaxLevy of VAT on rent as right to use - leasing of machinery and vehicles - Levy and point of tax - Whether in view of Sections 105 and 106 read with Section 3 of the Delhi Value Added Tax Act, 2004, lease rentals paid on or after 1st April, 2005 can be taxed under the aforesaid Act even when the lease agreement was executed between the parties on or before 31st March, 2005? - Held that:- Principle of ultra vires would not be applicable when challenge made is that one provision of the Act is ultra vires of another. Thus, constitutional validity of Section 3, or for that matter Section 2(n) of Act, 2002, was not challenged and even the doctrine of reading down was not relied. The High Court observed that in terms of the two provisions, lease instalments paid after 15th September, 2004 would be subject to tax even when the agreements were prior in point of time. The term 'sale' as defined in Section 2(n) of Act 2000, it was distinguished, would include deferred payment, i.e. when payment is staggered and not at one time. In such cases, right to use accrues in favour of the lessee when he pays rental regularly and in terms of the agreement. In this context, reference was also made to clause 29A inserted to Article 366 which treats certain transactions as sale by deeming effect. Thus, the said decisions support and affirm our reasoning. The term 'sale' as defined in Section 2(1)(zc) clause (vi) would include transfer of right to use goods. Section 2(1)(zm) defines 'turnover' to be aggregate of the 'sale price' which as per clause (zd)(iii) to Section 2(1) means valuable consideration or hire purchase amount received or receivable for such transfer irrespective of whether or not the rights to use goods is for specified period. Rule 4 of the DVAT Rules, 2004, in clause (b) stipulates that in case of transfer of right to use goods, not being hire purchase agreement or instalment sale agreement, is the proportion or sale price, i.e. lease rental due and payable during the relevant tax period. - Decided against the assessee. The date or time of payment may be different and subsequent to the taxable event, i.e., the date on which transfer of right to use goods is made. In Bombay Tyre International Limited (1983 (10) TMI 51 - SUPREME COURT OF INDIA), the Supreme Court held that levy of tax in our country has a status of constitutional concept, but the point of collection, i.e., time of collection would depend upon the statute. The statute could, therefore, declare the point at which the tax is to be collected, which need not synchronise with the taxable event and can be different in point of time. They do not relate to power and authority of taxation under the Act. They relate to the right of a State to tax, without violating and breaching the limitation and restriction not to tax the inter-State sales. It is in this context it has been held that the levy of tax is not on use of goods, but on transfer of right to use goods. Right to use goods is the resultant effect of transfer of right to use goods and in the context of sub-clause (d) to clause 29A of Article 366 for the purpose of deciding which State and whether a particular State has the right to tax the said transfer, observations have been made. The aforesaid legal position becomes clear from the decision of the Supreme Court in the case of Bharat Sanchar Nigam Limited and Another versus Union of India and Others, [2006 (3) TMI 1 - Supreme court]. Levy of penalty - Held that:- there is merit in the contention of the appellant that there is inherent contradiction in the order passed by the Tribunal. - enalty can only be imposed under the said provision when it is established that the return filed by the assessee is false, misleading or deceptive in material particulars or the assessee omits from a return any matter or thing without which return is false, misleading or deceptive in a material particular. - Tribunal was not right in directing levy of penalty @ 20% under Section 86(10) of the Act, after recording the finding that the appellant assessee had a reasonable cause - levy of penalty waived.
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