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VAT not applicable on transfer of right to use of goods if effective possession and control of the goods are not transferred

Value Added Tax - VAT and CST - By: - Bimal jain - Dated:- 3-8-2015 - Dear Professional Colleague, We are sharing with you an important judgment of the Hon ble High Court of Delhi, in the case of Hari Durga Travels Vs. Commissioner of Trade & Taxes, Delhi [2015 (5) TMI 461 - DELHI HIGH COURT] on the following issue: Issue: Whether the Agreement of giving on hire two Deluxe buses for being run on the routes as per requirement of the person to whom they are hired, constitutes transfer of right .....

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table condition and for purposes of upkeep, make the necessary arrangements with service centres/ dealers/ repair shops, etc., on the routes. Further, the Agreement stipulated that the Appellant shall be obliged to keep DTC indemnified against all claims arising out of accidental damage or loss caused during the operation to third party or to the vehicles and also remains responsible for payment of fines, penalties for violation of traffic rules etc. Furthermore, the Appellant was not entitled t .....

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AT on receipt amount under the provisions of the Delhi Value Added Tax Act, 2004 ( the DVAT Act ) and raised a demand of ₹ 12,96,749/- with imposition of interest and penalty. Later on, both the Objection Hearing Authority and the Ld. Tribunal upheld the Order passed by the Assessing Authority and held that the Agreement in question had resulted in transfer of the effective control and possession of the two buses to DTC and is covered under transfer of right to use goods under Article 366( .....

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79 - DELHI HIGH COURT] held that: The various terms of the Agreement make it vividly clear that the possession has always remained with the Appellant itself; Undoubtedly, it is the obligation of the Appellant to make the vehicles available, with their respective drivers, for being deployed on routes, and as per schedule, specified by DTC. However, the registration certificate and the permits continue to be in the control and possession of the Appellant who continued to be responsible for all rep .....

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