TMI Blog2003 (12) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... d., placed a purchase order on various manufacturers/suppliers of computers accessories in the month of February 1995. One such purchase order was dated January 31, 1995 on NIT for supply/ manufacture in accordance with specification enumerated in the lease agreement. At the time of the lease agreement the computers were not available. The goods were made to order. Before the assessing authority, the petitioner contended that since the goods were not in existence, the transfer of right to use did not take place at Haridwar where the agreement was executed. According to the petitioner, the placing of the purchase order by the petitioner with the manufacturers/ suppliers was only because of the lease agreement between petitioner and Bharat Heavy Electricals Ltd., and, therefore, the purchase order was an integral part of the lease and, therefore, the purchase order could not be separated from the lease. According to the petitioner in the present case petitioner received rental orders from Bharat Heavy Electricals Ltd., in terms of the lease agreement and in pursuance of the rental orders petitioner placed purchase orders pursuant to which computers were delivered from Bangalore and D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade and commerce and, therefore, it cannot be subjected to tax within the State of Uttaranchal merely because lease was executed at Haridwar and consequently imposition of tax under section 3-F of the U.P. Trade Tax Act, 1948 was illegal and bad in law. 3.. Arguments: Mr. Bharat Ji Agrawal, learned Senior Counsel for the petitioner contended that the purchase order was an integral part of the lease agreement between Bharat Heavy Electricals Ltd., and the petitioner dated January 11, 1995. That but for the lease agreement dated January 11, 1995 the petitioner would not have placed the purchase order on various manufacturers/suppliers of computers-accessories. That rental orders were placed from time to time by Bharat Heavy Electricals Ltd., on the petitioner in terms of the lease agreement dated January 11, 1995 and the computers-accessories were bought in view of the rental orders. It was further submitted that all manufacturers/suppliers were from outside the State of Uttaranchal. That the computers-accessories were not in existence at the time of execution of the lease dated January 11, 1995 between petitioner and Bharat Heavy Electricals Ltd. and, therefore, the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aridwar, the computers were installed at Haridwar and the rent was paid to the petitioner by Bharat Heavy Electricals Ltd. for working the computers in Uttaranchal and, therefore, tax was leviable on the total amount of lease rent received by the petitioner under section 3-F(1)(a) read with section 3-F(2) of the U.P. Trade Tax Act, 1948. He contended that the deemed sale was not an outside sale. He contended that the deemed sale was not a sale in the course of inter-State trade or commerce. He relied upon the judgment of the Supreme Court in the case of 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; (2000) UPTC 593 and he submitted that in the present case admittedly the goods were not in existence on the date of the lease and, therefore, the taxable event took place on the delivery of goods which was within the State of Uttaranchal and, therefore, the tax was correctly levied under section 3-F of the U.P. Trade Tax Act, 1948. In particular, learned counsel for the State relied upon paragraph 35(d) of the judgment of the Supreme Court in the case of 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; (2000) UPTC 593. He further contended that in this case the lease was execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." Explanation omitted by the Constitution (Sixth Amendment) Act, 1956, Sec. 4. Subs. by the Constitution (Sixth Amendment) Act, 1956, Sec. 4, for clauses (2) and (3). Subs. by the Constitution (Forty-sixth Amendment) Act, 1982, Sec. 3, for clause (3). (c) Article 366(29A) of the Constitution: "(4)(29A) 'tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the sale causes the movement of goods from one State to other. (iii) Depending upon facts and circumstances of each case, even lease transaction could be construed as deemed sale in the course of inter-State trade and commerce. In the determination of inter-State character of a sale the situs is immaterial. Where a State, while defining the expression "sale", makes the situs relevant for the purposes of deciding a deemed sale it cannot touch inter-State sale. This is because any State law concerning "deemed sale" covered by article 366(29A)(a) to (f) of the Constitution must satisfy the requirement of article 286 as also the provisions of the Central Sales Tax Act, 1956. In fact, article 366(29A) explains the expression "sale or purchase of goods" occurring in article 286 and also occurring in entry 54 of List II of the Constitution and further article 366(29A) amplifies the said expression "sale or purchase of goods" by a fiction. For the purposes of taxation, however, a deemed sale cannot be distinguished from an ordinary sale. Therefore, in cases of inter-State sales falling under section 3(a) of the Central Sales Tax Act, 1956 it is not relevant to consider the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 11, 1995 and December 10, 1999, the goods were not in existence. The assessing authority is bound to give a finding on this allegation after examining the terms and conditions of the lease, rental order, invoice and accounts of the petitioner. If the assessing authority finds that computers were not in existence on the date of the lease then he has to consider also the status of the purchase order. He has to find out whether the purchase order was an integral part of lease or whether purchase order was a separate transaction vis-a-vis the lease. In this case the petitioner had handed over the above documents to the assessing authority but the same were returned. In the assessment order there is no discussion on the terms and conditions of the lease, the purchase orders, the invoices, etc. The assessing authority was also required to consider the difference in the connotation of the words "unascertained goods" vis-a-vis "non-existent goods" on the date of the lease. In view of the judgment of the Supreme Court in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182 the assessing authority was required to keep in mind the difference between the tax on "use of goods" and the tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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