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M/s. L & T Finance Ltd. Versus The Commercial Tax Officer

Taxability - lease agreement - operating lease - Acquisition of Assets - case of appellant is that the ownership of the goods lie solely with the petitioner, and this is totally different from a Term loan, wherein, it is in essence, an agreement for borrowing - Held that: - The respondent has no explanation to offer, as to why, the matter was not taken to the logical end, and after issuance of the notice, dated 31.05.2007, there has been a long gap of more than 7 years before the next notice iss .....

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have taken into consideration what had transpired earlier and what was on their record from 2007 onwards. This Court can safely presume that the respondent was not even aware of the earlier proceedings, which were initiated in the year 2007. So far as the legal position is concerned, even it is accepted that the nature of transaction done by the petitioner amounts to deemed sales, then, provision under Section 4 (2) of the TNVAT Act 2006 would stand attracted. - The Writ Petitions are dispos .....

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pecial Government Pleader for the respondents. With consent on either side, these Writ Petitions are taken up final disposal. 2. These Writ Petitions are filed, challenging the assessment orders for the year 2006-07 to 2013-14 respectively. Since the common issue arises in all these Writ Petitions, they were heard together and disposed of by this common order. 3. The case of the petitioner is that, they are non-banking Finance Company, engaged in financing activities, including funding for borro .....

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r vehicles, computers and assets for their own use. The modus operandi adopted by the petitioner is that, the petitioner herein purchases goods like plant and machinery, motor vehicles, computers and assets and enters into an lease agreement with business entities, who want to hire the goods owned by the petitioner herein. In this type of agreement, the petitioner herein, who is the lessor, is the owner of the assets throughout the agreement. The lease is for a fixed period and on fixed monthly/ .....

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this is totally different from a Term loan, wherein, it is in essence, an agreement for borrowing. In this regard, the learned counsel appearing for the petitioner referred to relevant clause in operating the lease agreement, a specimen of which has been enclosed in the typed set of papers, and he has drawn the attention of this Court to clauses 4.2, 4.3, 5.1, 7.4, 7.5 and 7.6, and it is submitted that the above transaction falls within the realm of Section 4 of the TNVAT Act, for the purpose o .....

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7,they are not eligible for the input tax credit claimed by them. The petitioner submitted their reply, dated 21.06.2007. Gist of the reply is as hereunder:-"As regards your contention of the goods not being in our possession physically, we do admit that our lessees already took the delivery of goods and as such the same was not in our possession as on the date of implementation of VAT Act. The taxable event, which is certainly prior to the date of introduction of VAT Act. However, the good .....

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horized person on 29.01.2014. After the statement was recorded, the respondent issued a notice on 29.04.2014, stating that, in connection with ITC claim adjusted, cross verification has been made with annexure II of the monthly returns of respective sellers (details enclosed) from whom the dealer had purchased the tax paid goods and noticed that no sales were reported in any of the monthly returns as effected to the dealer. In the above said notice dated 29.04.2014, the respondent has made certa .....

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r nearly 1 1/2 years, and a fresh notice was issued on 27.08.2015. 7. On perusal of the notice, dated 27.08.2015, it is clear that there is no reference to the earlier notice, dated 31.05.2007, petitioner's reply dated 21.06.2007, notice dated 29.4.2014 and the reply given by the petitioner, dated 06.05.2014. Onceagain, very same allegation, which was made in the notice, dated 31.05.2007 was made in the subsequent notice, dated 27.08.2015. The only mistake committed by the petitioner is that .....

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eld that, it can be concluded that all the local purchases, said to have been made by the petitioner are as the seller is the lessor, and the lessee, who makes payment, as per invoice, is eligible to avail ITC. 8. The learned counsel appearing for the petitioner submits that, in the first notice, dated 31.05.2007, the respondent had admitted that the nature of transaction is deemed sales, and the finding rendered in the impugned orders stating that the tax invoice is not issued in the name of th .....

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are transactions pursuant to the operating lease agreement, whether ownership of the goods continue to remain with the petitioner, and what is being transferred to the lessee is only the right to use the goods. In fact, this is the stand taken by the petitioner at the very first instance, while giving reply, dated 21.06.2007, to the notice dated 31.05.2007, the relevant portion of which has been quoted in the preceding para. The respondent has no explanation to offer, as to why, the matter was n .....

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spondent is flawed and amounts to violation of principles of natural justice. However, when the notice dated 25.09.2015 was issued, the petitioner, though received the notice, did not file their objections. The stand taken by them for not being able to file their objection within the time permitted does not appear to be reasonable or acceptable. However, when the respondent had taken up the matter for adjudication, he ought to have taken into consideration what had transpired earlier and what wa .....

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