IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA STR No.: 1 of 2002 Reserved on: 11.08.2008 Date of decision: 27.08.2008 Industrial Finance Corporation of India. Petitioner. Versus The Excise & Taxation Officer. Respondent Coram The Hon’ble Mr.Justice Deepak Gupta, J. The Hon’ble Mr. Justice V.K.Ahuja, J. Whether approved for reporting?1 No. For the petitioner: None. For the respondent. Mr. Ram Murti Bisht, Dy. Advocate General. Per Deepak Gupta, J. By means of this reference made under the provisions of the Himachal Pradesh General Sales Tax Act, 1968, the following substantial question of law has been referred to this Court for determination:- “Whether the transaction of the applicant is covered within the provisions of Section 41 read with Article 286 of the Constitution of India and lease money received by the dealer from lessor is not taxable under the H.P. General Sales Tax Act, 1968.” Briefly stated, the facts of the case are that the assessee is a Public Limited Company engaged in providing financial assistance to various industries, as term loans. It enters into agreements with the companies for lease of machineries and equipments. During the year 1989, the assessee invited quotations for supply of certain 1 Whether the reporters of the local papers may be allowed to see the Judgment? yes . 2 plant and machinery from two different firms. Subsequently, the assessee placed orders with these firms for supply of the plant and machinery and the plant and machinery was to be supplied and installed at the two industrial units at Kandrori, District Kangra and Baddi, District Solan, respectively. Both the firms sold the machinery to the appellant and delivery of the same was made at Kandrori and Baddi. The plant and machinery was installed and erected for the industrial units on behalf of the assessee. The assessee paid erection and commissioning charges to the two firms. The aforesaid purchases were made by the assessee on the strength of the C-Forms at a concessional rate of tax. Thereafter, the assessee entered into an agreement with the two industrial units where the plant and machinery was installed for leasing out the plant and machinery on rental for a period of 96 months. There was a stipulation in the lease agreement that on the termination of the lease deed, the assessee would be entitled to sell, release or dispose of the plant and machinery in any manner it likes. The assessing authority created additional demand on the amount of rental which the assessee was receiving in lieu of the transfer of rights to use the goods. The appeal filed by the assessee was rejected and thereafter a second appeal was filed before the Financial Commissioner, Himachal Pradesh. On behalf of the assessee it was urged that the transfer was an interstate transfer and therefore, the State had no authority to levy tax on the same. On behalf of the revenue, it was urged that the instance of tax was not on the interstate transfer but 3 on the subsequent lease made by the assessee in favour of the two industrial concerns and this was a sale within the meaning of Section 2 (j) (iv) of the H.P. General Sales Tax Act, 1968. The Financial Commissioner rejected the appeal. Thereafter, a reference was made to this Court. Section 2(j)(iv) of the H.P.General Sales Tax Act, 1968 reads as follows:- “2. Definitions.- In this Act, unless there is anything repugnant in the subject or context,- xx.. xx.. xx.. xx.. xx.. xx.. xx.. xx.. (j) “sale” means any transfer of property in goods for cash or for deferred payment or for any other valuable consideration other than a mortgage, hypothecation, charge or pledge, and includes- (i), (ii) (iii)…… (iv) the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;” In the present case, we cannot accept the contention of the assessee that there is an interstate sale. The interstate sale was only in respect of the purchase by the assessee from the manufacturer of the plant and machinery. Once the plant and machinery was installed in the premises of the industrial concerns, further leasing of the same by the assessee to the industrial concerns was a transaction which took place solely within the State of Himachal Pradesh. By no stretch of imagination can this be said an interstate sale. 4 The definition of sale in Section 2(j)(iv) is absolutely clear and includes the hiring of goods for deferred charges. In the present case, the assessee has hired out the plant and machinery to the two industrial concerns, which is covered by the definition of sale quoted here-in-above. This will amount to a sale and therefore, the sales- tax can be levied on the rental charges recovered by the assessee from the industrial concerns. Consequently, we answer the question in favour of the revenue and against the assessee. ( Deepak Gupta ), J. 27th August, 2008 ( V.K.Ahuja ), J. ™