TMI Blog2015 (4) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... basis. Therefore, the assessee had a vested right of giving the cars on hire and receiving the rentals which was not exigible to tax. From 1.4.2005 KVAT Act has come into force. Section 3 is the charging Section. It provides that, the tax shall be levied on every sale of goods in the State by a registered dealer or a dealer liable to be registered, in accordance with the provisions of this Act. Therefore, the incidence of tax under Section 3 of the KVAT Act is the sale of goods. After the coming into force of the new Act, the assessee has not leased any car to his customers. Lease was prior to 1.4.2005. It is for a period of 5 years. Under the terms of the agreement, the customer has to pay lease rents for every month for a period of 5 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded Tax Act, 2003 (hereinafter for short referred to as the KVAT Act ). The assessee is engaged in the lease of cars to corporate bodies and to other customers in the State of Karnataka. All the cars which were leased out by the assessee till 31.3.2005 were purchased by it from dealers registered under the KST Act. The cars given on lease after 1.4.2005 were purchased from dealers registered under the KVAT Act. All such cars had suffered local tax in the State of Karnataka either under the KST Act or under the KVAT Act. Master lease agreements in standard formats were entered into by the assessee with the concerned customers for the tenure of five years. Soon after the execution of such agreements the cars were also delivered by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als)-1 who upheld the order of the Prescribed Authority and dismissed the appeals. 4. Aggrieved by the said order, the assessee preferred a second appeal to the Karnataka Appellate Tribunal. The Karnataka Appellate Tribunal after referring to the provisions of the KST Act as well as the KVAT Act held that, the taxing event under the KST Act is the sale of the relevant goods. In the case of transfer of right to use goods, the deemed sale occurs when the relevant agreement of transfer of right to use goods is executed. At that point of time itself the entire consideration for the entire duration of the contract could have been mentioned by the assessee Company and its customer in specific and definite terms in the contract itself in clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or impaired by the enactment of the KVAT Act, which is expressly enacted with prospective effect from 1.4.2005. There is no provision therein authorizing the levy of tax under the KVAT Act on the deferred receipts of consideration of sale which occurred prior to 1.4.2005 when the said Act was not in force. Therefore, the Tribunal held that the assessee is not liable to pay tax under the KVAT Act on the rentals received prior to 1.4.2005 till the expiry of the lease period. Aggrieved by the said order, the State has preferred these Revisions. 5. Learned Government Advocate assailing the impugned order contended that, though under the KST Act there was no liability to pay tax after coming into force of the KVAT Act, as consideration is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4.2005 in respect of transfer of right to use KST suffered cars leased out prior to 1.4.2005 is not exigible to tax under the KVAT Act? 8. The facts are not in dispute. The assessee under a lease agreement leased to its customers KST suffered cars after purchasing them from local registered dealers. The tenure of the Master Lease Agreement were continuous and unbreakable for 5 years though lease rentals were payable by the customers on a monthly basis. Therefore, the assessee had a vested right of giving the cars on hire and receiving the rentals which was not exigible to tax. From 1.4.2005 KVAT Act has come into force. Section 3 is the charging Section. It provides that, the tax shall be levied on every sale of goods in the State by a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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