Vat on lease of movable assets
This query is : Resolved
15 September 2011
A has given Excavator for earth work to a company. For purpose of calculation of consideration hour basis was fixed. The diesel,repairs & expenses for driver etc. are to be born by assessee i.e owner of machine.
Under such circumstances whether on gross amount of bill VAT will attracts under the provisions of Maharashtra VAT Act?
Whethwer the Buses given by MSRTC on contract basis for tours or marriages will be covered by leaseing of vehiocle temporarily? If turnover exceeds Rs. 500000/- in a year, tax will attract?
Kindly advice in the matter with case law or circular if, any.
Thanking You
Under such circumstances whether on gross amount of bill VAT will attracts under the provisions of Maharashtra VAT Act?
Whethwer the Buses given by MSRTC on contract basis for tours or marriages will be covered by leaseing of vehiocle temporarily? If turnover exceeds Rs. 500000/- in a year, tax will attract?
Kindly advice in the matter with case law or circular if, any.
Thanking You
16 September 2011
As per the provision of Section 2(24) – “Sale” — Sale means a sale of goods made within the State for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge. Ordinarily sale means transfer of property to buyer in goods for cash or deferred payment or other valuable consideration. A sale within the State includes a sale determined to be inside the State in accordance with the principles formulated in Section 4 of the Central Sales Tax Act, 1956. Following types of transactions are also included in definition of sale.
the transfer of property in any goods, otherwise than in pursuance of a contract, for cash, deferred payment or other valuable consideration;
the transfer of property in goods (whether as goods or in some other form) involved in the execution of’ a works contract including an agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property; (known as works contract transactions)
a delivery of goods on hire-purchase or any system of payment by instalments;
the transfer of the right to use any goods or any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (known as lease transactions)
the transfer of property in any goods, otherwise than in pursuance of a contract, for cash, deferred payment or other valuable consideration;
the transfer of property in goods (whether as goods or in some other form) involved in the execution of’ a works contract including an agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property; (known as works contract transactions)
a delivery of goods on hire-purchase or any system of payment by instalments;
the transfer of the right to use any goods or any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (known as lease transactions)
16 September 2011
Mr Prakash Kochar,
Further to the above expert's opinion please note the following points with regard to the above query:
1)VAT is leviable on the transfer of right to use receipts i.e.rentals.Here an earth mover has been sent for work and charges are made on hourly basis. But the control of the vehicle/machinery is still with the owner,i.e.arrangement for driving,fuel,repairs and servicing are done by him. So the property has not been completely handed over to the user. Charges are received for the work done by the machine and not for any transfer fo proprty.Similarly in the case of MSRTC buses sent on contract service also. The bus has not been handed over to the contractee,only a transportation service has been provided.Hence the charges/receipts in these cases are not taxable.The honourable Supreme Court of India has decided many cases on these lines.For the rentals to be taxable the movable property has to be completely handed over to the user.
MJK
Further to the above expert's opinion please note the following points with regard to the above query:
1)VAT is leviable on the transfer of right to use receipts i.e.rentals.Here an earth mover has been sent for work and charges are made on hourly basis. But the control of the vehicle/machinery is still with the owner,i.e.arrangement for driving,fuel,repairs and servicing are done by him. So the property has not been completely handed over to the user. Charges are received for the work done by the machine and not for any transfer fo proprty.Similarly in the case of MSRTC buses sent on contract service also. The bus has not been handed over to the contractee,only a transportation service has been provided.Hence the charges/receipts in these cases are not taxable.The honourable Supreme Court of India has decided many cases on these lines.For the rentals to be taxable the movable property has to be completely handed over to the user.
MJK
17 September 2011
Kindly consider 1. 1.DeterminationOrder Number: 178/CDVAT/2007/181 Dt.15-01-2008
Subject : Sehgal Tourists
Review Application
No.: 141/CDVAT/2006/135 Dt. 27/02/2007
Subject : Sehgal Tourists
Review Application
No.: 141/CDVAT/2006/135 Dt. 27/02/2007
17 September 2011
Wording used in sect.2(24)((iv) is transfer of right to use for any goods for any purpose but no where it is mentioned the transfer of property for use is necessary. Only rights of use for particular period are given, it will be at his choice when to use when to stop where to use, may be as per terms of agreement, which may be considered as right to use.
Considering this circumstances whether tax will attaract?
Kindly consider 1. 1.DeterminationOrder Number: 178/CDVAT/2007/181 Dt.15-01-2008
Subject : Sehgal Tourists
Review Application
No.: 141/CDVAT/2006/135 Dt. 27/02/2007
Cases reported- 113 STC 317
122 STC 175 & 83 STC 325 and also case of 20th century Vs. Mah (SC) may please be consider.
Reply in the matter will help in general. Please advice.
Considering this circumstances whether tax will attaract?
Kindly consider 1. 1.DeterminationOrder Number: 178/CDVAT/2007/181 Dt.15-01-2008
Subject : Sehgal Tourists
Review Application
No.: 141/CDVAT/2006/135 Dt. 27/02/2007
Cases reported- 113 STC 317
122 STC 175 & 83 STC 325 and also case of 20th century Vs. Mah (SC) may please be consider.
Reply in the matter will help in general. Please advice.
17 September 2011
Mr. Prakash Kochar,
I have refered to the cases quoted by you also.In the cases pertaining to Tripure Bus Syndicate(122stc175)& Krishna Chandra Behra(83STC325),the vehicles were transferred to the State Govt or State Transport corpn under an agreement and the vechicles were left to transferee to use as they like.The owners had no control of their buses.Hence they were treated as leasing and taxable.Passengers who travel in a bus,train or aircraft do not have any control on the carrier but they get their required service.If somebody hires a bus for a travel or a marriage party it is also taken in the same sense and given exemption. Here the vehicle is to be given delivery i.e. entrusted completely to the transferee to be used in his own control,including driving,fuel,repairs,servicing etc.In the case of 20th century Finance corpn-although the question decided therein was on situs of sale or transfer of right to use,the above view has been has been expresed.In the case of M/s Laxmi Audio Visual Vs St of Karnataka,the Karnataka High Court has spelt out this point very clearly. If a sound system has been carried,installed,operated,removed and brought back by the hirer, then it is not taxable. If the same actions are done by the costomer himself then the transaction attracts tax.
I do not have the CDVAT case law with me
but, the above decisions are enough to know the position of law.
MJK
I have refered to the cases quoted by you also.In the cases pertaining to Tripure Bus Syndicate(122stc175)& Krishna Chandra Behra(83STC325),the vehicles were transferred to the State Govt or State Transport corpn under an agreement and the vechicles were left to transferee to use as they like.The owners had no control of their buses.Hence they were treated as leasing and taxable.Passengers who travel in a bus,train or aircraft do not have any control on the carrier but they get their required service.If somebody hires a bus for a travel or a marriage party it is also taken in the same sense and given exemption. Here the vehicle is to be given delivery i.e. entrusted completely to the transferee to be used in his own control,including driving,fuel,repairs,servicing etc.In the case of 20th century Finance corpn-although the question decided therein was on situs of sale or transfer of right to use,the above view has been has been expresed.In the case of M/s Laxmi Audio Visual Vs St of Karnataka,the Karnataka High Court has spelt out this point very clearly. If a sound system has been carried,installed,operated,removed and brought back by the hirer, then it is not taxable. If the same actions are done by the costomer himself then the transaction attracts tax.
I do not have the CDVAT case law with me
but, the above decisions are enough to know the position of law.
MJK
18 September 2011
Very very Thanks for Reply.
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