2009 (10) TMI 853 - HC - VAT and Sales Tax

Deemed sale - non disclosure of the turnover of rent receivable in the return - Held that - Explanation I clause (ii) says that sale is deemed to take place in the State of U.P. if the goods are used by the lessee within the State during any period notwithstanding that the agreement for the lease has been entered into outside the State or that the goods have been delivered to lessee outside the State. Therefore even if the agreement was executed at Delhi in view of the aforesaid provisions there was deemed sale in the State of U.P. and the trade tax authorities have a jurisdiction to levy the tax. So far as the submission of learned counsel for the applicant that the plant and machinery were immovable cannot be accepted. Such pleading has not been taken before the authorities below at any stage. So far as the penalty under section 15A(1)(a) is concerned no error in the order of the Tribunal. Merely because the rent has not been received the applicant cannot be absolved from the liability to disclose such sale in the return. Sales with deferred payment are also included within the ambit of definition of sale under section 2(h) of the Act and therefore such receipts were liable to be disclosed. The explanation of the applicant for not disclosing the turnover of rent receivable in the return has rightly not been accepted. Revision dismissed.

Summary

Issues:
Jurisdiction of trade tax authorities based on the location of agreement execution and right to use transfer, taxability of rent received for plant and machinery, penalty under section 15A(1)(a) of the Act.

Jurisdiction of Trade Tax Authorities:
The case involved revisions under section 11 of the U.P. Trade Tax Act, 1948, challenging the Tribunal's order for the assessment year 2000-01. The applicant contended that since the stamp paper was purchased and the agreement was executed in Delhi, the right to use was transferred in Delhi, thus the U.P. trade tax authorities lacked jurisdiction to levy tax on the rent received. The Tribunal found that the lease deed did not indicate execution in Delhi, and even if it was, the goods were used in U.P., making the sale deemed to have taken place in U.P. The Tribunal's factual finding was upheld, citing the Supreme Court's decision in 20th Century Finance Corporation Ltd. v. State of Maharashtra.

Taxability of Rent Received:
The applicant received rent for providing plant and machinery on lease, arguing that as the machinery was immovable, the rent should not be taxed. However, the Tribunal held that the location of use determines taxability, not the immovability of the goods. The Tribunal referred to relevant case laws and provisions, emphasizing that the goods being used in U.P. made the sale taxable in the state, regardless of where the agreement was executed.

Penalty under Section 15A(1)(a) of the Act:
The applicant failed to disclose rent in the return, claiming it was not received and thus not taxable. The assessing authority levied a penalty under section 15A(1)(a), which was upheld by the Tribunal. The Court ruled that non-receipt of rent does not absolve the applicant from disclosing the turnover in the return, as sales with deferred payment are included in the definition of "sale" under the Act. The explanation for non-disclosure was deemed unacceptable, and the penalty was upheld.

In conclusion, both revisions were dismissed as the Tribunal's findings were upheld, emphasizing the jurisdiction of trade tax authorities based on the location of goods' use, taxability of rent based on use location, and the obligation to disclose all taxable turnover, including deferred payments.