VAT not leviable on lease charges paid by Railway Department

Ultratech Cement Limited Vs State of Chhattisgarh (Chhattisgarh High Court)

Chhattisgarh High Court held that lease charges paid by the Railways Department to the Petitioner Company is not subjected to levy of VAT as the taxable event is the transfer of right to use goods and not right to use goods or the use of goods

Facts-

The issue involved in the instant case is the levy of Value Added Tax on the lease charges paid by the Railways Department to the Petitioner Company. The levy of tax was under Section 2(s)(vi) of the VAT Act for the assessment year 2009-10. The assessment for the year 2009-10 was completed on 22.12.2014. In the course of assessment, the Assessing Officer assessed the income of Rs.29,20,347/- as lease rent obtained by the Assessee from the Railways Department. Treating the said receipt of lease rent by the Petitioner Company from the Railways Department as deemed sale, tax was assessed on the above mentioned amount at the rate of 18% which came to around Rs.4,08,849/-.

Crux of the matter is that the Indian Railways had floated a Scheme known as “Own Your Wagon Scheme” to which the Petitioner Company expressed their interest in purchasing Wagons and for which necessary proposal was put forth by them. The proposal was approved by the Railways Board.

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