important point
The subject-matter of taxation is transfer of right to use goods.

judgment

Kapadia, J. —

1.Leave granted.

2.This civil appeal filed by the assessee is directed against the judgment and order dated 19.10.06 passed by the High Court of Judicature at Allahabad in three Trade Tax Revision Nos.691, 692 and 693 of 2006 by which it has been held that the transaction of transfer of the right to use was a local sale under Section 3F of the U.P. Trade Tax Act, 1948 (for short, “1948 Act”).

3.Assessee is a company incorporated under Companies Act, 1956 having its registered office at Panjim, Goa. It is engaged in the business of leasing and financing plants and machinery.

4.In this civil appeal we are concerned with the assessment years 1994-95, 1995-1996 and 1996-97.

5.While examining the case for the assessment years in question pertaining to M/s. Kesar Enterprises Limited Baheri, U.P., the Department noticed that the assessee herein supplied plants and machinery to M/s. Kesar Enterprises Limited on lease and that the assessee was in receipt of lease rent for the machinery supplied by it to M/s. Kesar Enterprises Limited Baheri, U.P. Therefore, the Assessing Authority issued notices under Section 3F of the 1948 Act to show cause as to why tax should not be levied on the lease rent received by the assessee herein. None appeared on behalf of the assessee and, therefore, A.O. passed ex-parte assessment orders dated 31.3.98 and 27.3.99 imposing tax on the lease rent received by the assessee. The said assessment orders were confirmed by the Deputy Commissioner (A).

6.Aggrieved by the orders passed by the Deputy Commissioner (A), the assessee preferred second appeal under Section 10 of the 1948 Act before the Tribunal, Bareilly. Vide order dated 28.1.04 the Tax Tribunal remanded the cases to the A.O. for fresh disposal. The Tribunal directed the A.O. to consider the cases de novo in the light of the judgment of this Court in the case of 20th Century Finance Corpn. Ltd. and Anr. v. State of Maharashtra,1 (2000) 6 SCC 12.

7.On remand, the A.O. held that in the lease agreement dated 24.3.92 there was a warranty clause which indicated that M/s. Kesar Enterprises Limited had selected the equipments which were leased out to it prior to its purchase by the assessee. A.O. came to the conclusion that the equipment was purchased prior to the execution of the lease dated 24.3.92. According to A.O., in view of the said clause in the said lease the assessee was called upon to produce the agreement/arrangement either oral or written pursuant to which the equipment stood purchased by the assessee. According to A.O., despite opportunity the assessee failed to produce such agreement/arrangement. Further, the A.O. also relied upon an invoice dated 26.2.92 under which the assessee had purchased boilers and turbines from Punjab Chemicals and Pharmaceuticals Ltd., Dist. Patiala, Punjab, in which there was reference to the Purchase Order dated 28.11.91 which indicated that the equipment was purchased under an agreement/arrangement prior to lease agreement dated 24.3.92 which lease has shown to have been executed at Mumbai as an afterthought and in order to earmark the transaction as an outside sale. This finding of the A.O. was confirmed once again by the Deputy Commissioner (A). It was held that since the equipment was purchased on 26.2.92 (as indicated by the invoice at page No.36 of the S.L.P. Paper Book), the movement of the said equipment cannot be said to have taken place from ex-U.P. place to Baheri in U.P. in pursuance of the lease dated 24.3.92. It was further held that the Letter of Intent dated 29.10.91 was not a part of the lease. Consequently, the appeal filed by the assessee stood dismissed. The concurrent findings, above-mentioned, were affirmed by the Tribunal vide its order dated 6.5.06. The Tribunal further held that there was no merit in the argument of the assessee that lease agreement was executed pursuant to Letter of Intent dated 29.10.91, particularly, when there was no indication to that effect in the lease. A