The main legal point established is that the nature of a contract is determined by whether the main object is the transfer of property in a chattel or the carrying out of work by bestowal of labor and service with materials used in execution of such work.

( 1 ) THIS is a revision filed by the applicant under Section 11 of the U. P. Sales Tax Act, 1948 against the order of Tribunal dated March 8, 1991 relating to assessment year 1984-85.

( 2 ) THE applicant was a manufacturer of electrode, welding-rods and was also a trader of scrap, iron and steel rods. During the year under consideration, the applicant had entered into a contract on February 28, 1984 with M/s. Gunkar Electrodes Pvt. Ltd. , Rampur, for design, manufacture, fabricate and installation of complete machinery and equipment of electrodes plant for Rs. 5,15,000. The claim of the applicant was that the nature of works was works contract and not sale and therefore, the amount received for execution of such contract was not liable to tax. Assessing authority had not accepted the claim of the applicant and treated the agreement as contract for sale and not works contract and accordingly levied tax on the amount of Rs. 5,15,000. Aggrieved by the order of assessing authority, applicant filed appeal before the assistant Commissioner (Judicial), Sales Tax, Moradabad, which was rejected. Claim of the dealer of works contract was also rejected by Tribunal. Being aggrieved by the order of Tribunal, the present revision has been filed.

( 3 ) THE only question for consideration in the present revision is that whether the agreement dated february 28, 1984 between the applicant and M/s. Gunkar Electrodes Private Limited, Rampur, was in the nature of works contract or contract for sale. A copy of the agreement is annexure 2 to the present revision. It has also been referred in the order of Tribunal. The agreement reads as follows : agreement this agreement is made at Rampur on this 28th day of February, 1984. M/s. Heera Electrodes, rampur, having its office near Kosi River Bridge, Rampur, represented by Sri Pradeep Kumar jain, its partner, hereinafter referred to as the first party. AND m/s. Gunkar Electrodes Private Ltd. , Rampur, having its registered office at Jwalanagar, rampur, and being represented by Shri R. B. Jain, managing director of the company, hereinafter referred to as the second party. Whereas the second party is desirous of getting supplied an electrode plant from the first party, both the parties have entered into the following agreement in this connection :

1. That the first party will design, manufacture, fabricate and install the complete machinery and equipments of electrodes plant as per quotations furnished by the first party to the second party, which is annexure I to this agreement.

2. That the costs of electrodes plant so fabricated, supplied, erected and installed by the first party at the site of the second party will be Rs. 5,15,000 (rupees five lakhs fifteen thousand only), which will include the costs of plant, installation charges, providing of technical know-how and giving of training to staff.

3. That the second party will pay amount to the first party as running payments as per requirement of the first party, but maximum to the extent of 80 per cent of the costs of work done/costs of material at site.

4. That till the supply and installation of electrode plant and machinery by the first party to the second party, the second party will be bound to pay 90 per cent of the costs of the electrode plant and remaining 10 per cent may be paid by the second party to the first party after watching performance of the supplied electrode plant and machinery for a period of one year.

5. That the first party also agrees to take back plant if it fails to give full performance during the period of one year from the date of installation of plant and in that case the total cost of the plant will be refunded by the first party to the second party.

6. That the first party hereby confirms that it will provide operational staff for the electrode plant under this agreement. The said operational staff will remain in the direct employment of the second party on terms and conditions to be negotiated in-between