TMI Blog2003 (8) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... not included. The assessing authority therefore, initiated proceedings under section 19 of the Act in respect of those two years. The assessment year 1997-98 was pending before the assessing authority at that time. In reply to the pre-assessment notice, the assessee contended that the lease charges received for the aforesaid three years are not liable to be included in the turnover for the purpose of assessment under the Act for the reason that the assessee had not transferred the right to use the excavator in favour of M/s. Sulekha Clay Mines during these years. The assessing authority had rejected the said contention on the ground that the accounts maintained by the assessee showed that the customer, namely, M/s. Sulekha Clay Mines had incurred expenses for the use of the excavator apart from payment of lease charges. This according to the assessing authority would show that the assessee had delivered possession of the excavator to M/s. Sulekha Clay Mines for their use. This finding of the assessing authority was confirmed by the first appellate authority and by the Tribunal in appeals filed by the assessee. 4.. Sri N.N.D. Pillai, learned counsel appearing for the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had transferred the right to use the excavator to M/s. Sulekha Clay Mines and that the consideration received therefor, is exigible to tax under section 5(1)(iii) of the Act. The Government Pleader relied on the decision of this Court in Rohini Panicker v. Additional Sales Tax Officer [1997] 104 STC 498; (1997) 5 KTR 112 and the decisions of the Supreme Court in Aggarwal Brothers v. State of Haryana [1999] 113 STC 317; (1999) 7 KTR 302 and in State of Uttar Pradesh v. Union of India [2003] 130 STC 1. The Government Pleader also further submitted that the decision of the Supreme Court in A.P. Pollution Control Board v. Prof. M.V.Nayudu AIR 1999 SC 812 has no application to the present case and further, the other decisions relied on by the counsel for the assessee are distinguishable. 6.. There is no dispute in this case that what is sought to be assessed under section 5(1)(iii) of the Act is the hire-charges/lease charges received by the assessee for use by M/s. Sulekha Clay Mines for excavation purposes. There is also no dispute with regard to the quantum of turnover sought to be assessed. The only dispute as already noticed is that, according to the assessee, the hire-charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are available irrespective of the fact where the goods are located and a written contract is entered into between the parties, the taxable event on such a deemed sale would be the execution of the contract for the transfer of right to use goods. But in case of an oral or implied transfer of the right to use goods it may be effected by the delivery of the goods." The question regarding the applicability of the provisions of section 5(1)(iii) of the Act came up for consideration before this Court in Bahulayan's case (1992) 1 KTR 137 where the question was as to whether hire-charges received by a lorry owner for carrying goods on hire is exigible to tax. The division Bench of this Court after referring to the various provisions of the Act took the view that notwithstanding the very wide language used in the definitions of the words "dealer" [section 2(viii)(f)(4)], "sale" [section 2(xxi), Explanation (3B)], [section 2(xxvii)] "turnover " and in section 5(1)(iii) of the Act the lorry hire charges received by the assessee is not exigible to tax under the Act. It was held that it cannot admit of any doubt that there is no transfer of any right to any person regarding the lorry to use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the contractor and he was responsible for any loss or damage to it and in view of the terms and conditions contained in the agreement, there was transfer of property in goods for use and on the amounts collected by the respondent as charges for lending machinery attracted tax liability under section 5-E of the Act." The High Court after scrutiny and close examination of the clauses contained in the agreement, came to the conclusion that the transactions between the respondent and contractors did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the essential requirement of section 5-E of the Act, i.e., transfer of right to use machinery, the hire charges collected by the respondent from the contractors were not exigible to tax. The Supreme Court agreed with the High Court and observed that "the effective control of the machinery even while the machinery was in use of the contractor was that of the respondent-company, the contractor was not free to make use of the machinery for the works other than the project work of the respondent or move it out during the period the machinery was in his use, the condition tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the rent received from the subscribers is exigible to tax under the sales tax enactment. 8.. From all the aforesaid decisions, it is clear that in order to attract the provisions of section 5(1)(iii) of the Act, particularly the expressions "transfer of the right to use goods", there must be a parting with the possession of the goods for the limited period of its use by the assessee in favour of the lessees. In other words, so long as effective control of the goods is with the assessee, the rent received from the customers for use of the goods will not attract the provisions of section 5(1)(iii) of the Act. It is in those circumstances, it has been held by this Court in Bahulayan's case (1992) 1 KTR 137, that the hire charges received for use of the lorry is not exigible to tax under section 5(1)(iii) of the Act, for, the effective control of the lorry was always with its owner. It is on this principle, it was held in Rohini Panicker's case [1997] 104 STC 498 (Ker), that lending of video cassette for use by the customers is exigible to tax under the Act, for, the possession of the video cassette is given to the customers for their use according to their will. It is in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for, this aspect of the matter is not seen mentioned either by the assessing authority or by the first appellate authority. 10.. On a consideration of these materials, we are of the view that the question as to whether there was a transfer of the right to use the excavator in favour of M/s. Sulekha Clay Mines has to be considered afresh, in the light of the principles laid down by this Court and by the Supreme Court. It is open to the assessing authority to collect all materials regarding arrangement between the assessee and M/s. Sulekha Clay Mines before deciding the said question. It is also open to the assessee to produce all materials and evidences in support of their contention that there is no transfer of right to use the goods. We accordingly, set aside the orders of the three authorities on this aspect and remit the matter to the assessing authority for passing fresh orders in accordance with law and in the light of the observations made hereinabove. It is open to the assessee to place all evidences before the assessing authority in support of his claim. The tax revision cases are disposed of as above. A copy of this judgment under the seal of this Court with the signa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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