Just a moment...

Report
ReportReport
Welcome to TaxTMI

We're migrating from taxmanagementindia.com to taxtmi.com and wish to make this transition convenient for you. We welcome your feedback and suggestions. Please report any errors you encounter so we can address them promptly.

Bars
Logo TaxTMI
>
×

By creating an account you can:

Report an Error
Type of Error :
Please tell us about the error :
Min 15 characters - Max 2000 characters0/2000
Add to...
You have not created any category. Kindly create one to bookmark this item!
0 /50 characters
Create New Category
Hide
Title :
Description :
+ Post an Article
Post a New Article
Title :
0/200 char
Description :
0 char
Category :
Co Author :

In case of Co-Author, You may provide Username as per TMI records

Delete Reply

Are you sure you want to delete your reply beginning with '' ?

Delete Issue

Are you sure you want to delete your Issue titled: '' ?

Articles
Back

All Articles

Advanced Search
Reset Filters
Search By:
Search by Text :
Press 'Enter' to add multiple search terms
Select Date:
FromTo
Category :
- 0 - Views
Sale of used cars is not subject to VAT under the Delhi Value Added Tax Act, 2004
Date 07 Jan 2015
Replies1 Replies
Written By
Sale of Used Cars Exempt from VAT Under Section 6(3) If Specific Conditions Are Met, Delhi High Court Rules.
The Delhi High Court ruled that the sale of used cars is not subject to VAT under the Delhi Value Added Tax Act, 2004, provided specific conditions in Section 6(3) are met. The appellants, who were not motor vehicle dealers, purchased vehicles without claiming input tax credit. The court distinguished between capital goods and capital assets, noting that motor vehicles are capital goods. The court found that the conditions for VAT exemption were satisfied, as the vehicles were used for business purposes, and no tax credit was claimed. Consequently, the appeal was allowed in favor of the appellants.

Dear Professional Colleague,

“Sale of used cars is not subject to VAT under the Delhi Value Added Tax Act, 2004

We are sharing with you an important judgment of Hon’ble High Court, Delhi, in the case of Anand Decors and Others vs. Commissioner of Trade and Taxes, New Delhi [2014 (12) TMI 1024 - DELHI HIGH COURT] on following issue:

Issue:

Whether the sale of used cars is subjected to VAT under the Delhi Value Added Tax Act, 2004?

Facts and background:

Anand Decors and Others (“the Appellants”) were manufacturing certain commodities and were registered dealers under the Delhi Value Added Tax Act, 2004 (“DVAT Act”). The Appellants purchased motor vehicles/ cars, paid Sales tax/ VAT but did not avail input tax credit thereon under DVAT Act. The Appellants were not dealers or traders in motor vehicles.

The Department alleged that the resale of the used motor vehicle to third parties should be added or included in the taxable turnover and thus exigible to VAT. The Appellate Tribunal, Value Added Tax, Delhi upheld the contentions of the Department and held that the sale of motor cars or other capital assets are not exempt under Section 6(3) of the DVAT Act, and should be included in the taxable or business turnover of the Appellants. Being aggrieved, the Appellants preferred an appeal before the Hon’ble High Court of Delhi.

Held:

The Hon’ble High Court of Delhi held as under:

  • Capital goods and Capital assets are distinguishable;
  • Motor Vehicles would be a capital good as defined in Section 2(f) of the DVAT Act wherein the expression used is "directly or indirectly, in the process of trade or manufacturing......" and purchase thereof would form part of the business. But input tax credit of VAT paid would not be available by virtue of Section 9(2)(b) of the DVAT Act as the motor cars purchased and sold are non-creditable goods and they are included in the seventh Schedule of the DVAT Act.
  • The following four conditions stipulated in Section 6(3) of the DVAT Act for availing exemption under DVAT are duly met in the instant case:
  1. There should be a sale of Capital goods;
  2. The said Capital goods should have been used by the dealer from the time of purchase till sale;
  3. The purpose for which the Capital goods were used should be for making sale of taxable goods or taxable goods and non-taxable goods. The Capital goods should not be exclusively used for making sale of non-taxable goods;
  4. The dealer should not have taken tax credit in respect of such capital goods under Section 9 of DVAT Act.

Hence, the Hon’ble High Court of Delhi allowed the appeal in favour of the Appellants and held that sale of used cars is not subject to VAT provided that four conditions stipulated in Section 6(3) of the DVAT Act for availing exemption under DVAT are duly met.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

Delhi:

Flat No. 34B, Ground Floor, Pocket - 1,

Mayur Vihar, Phase - I,

Delhi – 110091, India

Desktel: +91-11-22757595/ 42427056

Mobile: +91 9810604563

Chandigarh:

H.No. 908, Sector 12-A,

Panchkula, Haryana – 134115

Kolkata:

Ist Floor, 10 R G Kar Road

Shyambazar, Kolkata – 700 004

Email: bimaljain@hotmail.com

Web: www.a2ztaxcorp.com

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

1 answers
Sort by

Old Query - New Comments are closed.

Hide
- 0
Replied on Jul 5, 2015

hi,

i have a practical situation here!

a manufacturing company having business in maharashtra and mvat registration buys a car for his director in delhi and pays delhi vat and takes the assets in its books and claim depreciation as asset is used for business purpose.

now the company has sold after using it in delhi itself.

query is ..is the transaction liable for tax under mvat or dvat or interstate sale. as business location is maharashtra but capital goods in delhi. please also quote reference sections for justification.

Old Query - New Comments are closed.

Hide
Similar Articles
Recent Articles