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2022 (12) TMI 808 - AAAR - GSTPlace of supply - Finance Lease - leasing of tank containers taken form a supplier i.e., lessor who is located outside India and the tank containers do not reach India - supply of goods and tank containers do not reach the Indian Territory - HELD THAT:- From the terms of the Lease purchase agreement it is evident that the appellant is obtaining the containers on lease for a period of 5 years and after expiry of 5 years or prior to five years the appellant has an option to purchase the container on payment of certain amount as per the contract. On exercising the option to purchase and payment of corresponding amount the ownership of the container passes on to the appellant from the lessor. If the appellant fails to purchase the containers he shall return back the same to lessor. Hon'ble Supreme court of India in case of M/S MAGMA FINCORP LTD. VERSUS RAJESH KUMAR TIWARI [2020 (10) TMI 1347 - SUPREME COURT] held that the financier/Lessee continues to remain the owner of a vehicle, covered by a hire purchase agreement till all the hire installments are paid and the hirer/lesee exercises the option to purchase. Till such time the option is exercised the hirer remains only as the trustee or bailee of goods covered by such agreement. The same is applicable to lease purchase agreements also. From the Conditions of the Lease purchase agreements and Judgment of Hon'ble Supreme court of India M/s Magma fincorp Limited Vs Rajesh Kumar Tiwari, the ownership of the containers lies with M/s Tankspan Leasing Ltd until the appellant exercises option to purchase the container as per the agreement - there is no transfer of title in goods until the appellant purchases the container and this fact wasn't disputed either. The appellant while bringing to fore the discussion on Accounting Standards has rightly contended that the substance of an agreement prevails over its form. However, substance prevails over form when Substance of an agreement doesn't align with its form. Here in this case, form of the agreement (leasing agreement) aligns with the substance (intention to lease). The intention of the parties was to lease the containers with an option to purchase - the intentions were evident as seen from the agreement; the monies arising out of the claim of insurance shall be transferred to the Lessor (the owner of the goods). As per the terms of agreement the lessee cannot even alter the color, identification marks or undertake Buffing(polishing) without the written approval from the lessor. Hence, the claim of the appellant that the intention of the parties is to transfer the title from the inception cannot be accepted. The transaction attracts IGST and is exigible to tax under the provisions of Sub-section(1) and Sub-section (3) of Section 5 of IGST Act and Notification No: 10/2017 -IGST(R) - Further as per the Provisions of Section 13 of IGST Act,2017 where the location of the supplier of services or recipient of services is located outside India, the place of supply is the location of recipient of services. Therefore, the transaction is taxable under reverse charge basis, with tax to be paid by the recipient of services, i.e. M/s Deccan Transco Leasing Private Limited with Place of Supply as 'Telangana'.
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