Case Law Details

Case Name : Anand Decors Vs Commissioner Of Trade And Taxes (Delhi High Court)
Appeal Number : ST. APPL. 35/2014
Date of Judgement/Order : 23/12/2014
Related Assessment Year :
Courts : All High Courts (3745) Delhi High Court (1183)
CA Sumit Grover

Recently, Hon’ble Delhi High Court in the matter of Anand Decors & Ors. v. CTT, New Delhi, has pronounced that the cars, even though fall within capital goods, but sale of used cars is not subject to VAT under Delhi VAT Act, by virtue of section 6(3) of ibid.

Brief facts of the case:
 
The appellants were manufacturing certain commodities & were registered dealers under DVAT Act. They purchased motor vehicles(though non-dealing in the trading of motor vehicles) but didn’t avail ITC thereon under DVAT. The revenue authorities considered the subsequent sale of said vehicles(post use thereof) as chargeable to VAT. The Tribunal also upheld the view of department. Thereafter, the appellant moved to High Court. And following observations were made by the Court:
1) Capital goods & capital assets are distinguishable;
2) Motor Vehicles would be a capital good, since the expression used is “directly or indirectly used in manufacturing……” & its purchase thereof would form part of business, but ITC thereon is not available by virtue of section 9(2).
3) Four conditions have be met out for excluding sale of car from the ambit of taxability under DVAT(i.e. exemption u/s 6(3) of ibid):
  • There should be a sale of capital goods;
  • The said capital goods should have been used by the dealer from the time of purchase till sale;
  • The purpose for which the capital goods were used should be for making sale of taxable goods or taxable goods and non-taxable goods. The capital goods should not be exclusively used for making sale of non-taxable goods.
  • The dealer should not have taken tax credit in respect of such capital goods under Section 9.
4) In the instant case, all these conditions have been duly fulfilled by the appellant, accordingly, the benefit of exemption from VAT can’t be denied.
Comments: This verdict has emerged as a breather to the industry. Undue litigation from departmental side would be halted till the time any overruling verdict by the Apex Court is pronounced.Such types of litigation prone areas should also be taken up by the Ministry of Finance at the time of framing GST laws.
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Category : Income Tax (25333)
Type : Judiciary (10108)

8 responses to “Delhi VAT : Sale of used cars not subject to VAT”

  1. santosh kumar singh says:

    sir we have a registered dealer in dvat, we sale a old used car and we have not input claim in the time of purchase. as per your guidance vat not applicable on sale of old car, but we confused we show sale amount in exempted sale or not consideration in turnover. kindly guide for dvat return file process.

  2. PANKAJ HASIJA says:

    What if a used car selling his used car purchase to local customer in the market. Whether VAT applicable on them??
    Condition no. 1 not applicable on them.

    Can any please guide.

  3. Ravi says:

    Sir,

    I had a car, whose value after three years of depreciation is 3.5 lakhs. I Completed the loan and sold it for 4.0 lakh. My auditor has included only 50000/- as income from sale of car. Am I not eligible for full value of car, i.e., 3.5lakhs? I paid the whole loan from my salary, hence i feel the sale should be considered as income.

    Ravi

  4. CA VIVEK BANSAL says:

    THANKS FOR VERY USEFUL INFORMATION.WHETHER THERE IS ANY PROCEDURE THROUGH WHICH DECISIONS OF DVAT TRIBUNAL OR ANY OTHER COURT DECISIONS REGARDING DVAT CAN BE KNOWN.

  5. DAYA NAND GARG says:

    A GOODS TPT. AGENCY (HAVING ITS OWN FLEET) IF SALES TSOME OLD TRUCKS THEN IT SHOULD BE TAXED OR NOT ALTHOUGH THAT HAS NOT TAKING ANY VAT INPUT BENEFIT. PLEASE CLEAR THE SCENERIO.

  6. Tax Baniya says:

    If vat is not applicable. Is service tax is applicable on sale of used cars.

  7. VIKRAM GROVER says:

    Dear Sir,
    In this scenerio, whether a car given to employee for his personal use , when subsequently sold will be liable for DVAT ?
    Please reply? Presently we are paying DVAT, but whether this judgement will affect the scenerio ?
    Rgds

    • V M JINDAL says:

      A HOSPITAL MAKING SALE OF OLD/USED EQUIPMENT. THAT NO INPUT TAX CREDIT TAKEN ON THE SAME.WILL IT BE LIABLE FOR CHARGING VAT ON THE SALES OF EQUIPMENT.

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