IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 07.07.2011 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Mr.Justice M.JAICHANDREN T.C. (Revision) No. 430 of 2006 The State of Tamilnadu rep. By the Deputy Commissioner (CT) Chennai (Central) Division Chennai 600 006 ... Petitioner -vs- Tvl. Jayalakshmi Enterprises 31, Baker Street Chennai 112 ... Respondent Revision Petition filed u/s 38 of the TNGST ACt 1959 to revise the orders of the Sales Tax Appellate Tribunal (Additional Bench), Chennai in S.T.A.No.15/2001 dated 21.8.2003 against the order of the Appellate Assistant commissioner (CT) III Chennai -108 in A.P.No.325/99 dated 14.1.2000 relating to Assessment year 1993-94 against Prop.Rc.1002/99/B1 dated 31.3.99 of the Dy. Commercial Tax officer, Vepery Assessment circle Chennai. For Petitioner : Mr.R.Sivaraman, Special Government Pleader (Taxes) For respondent : Mrs. Hema Muralikrishnan ORDER (Order of the Court was made by CHITRA VENKATARAMAN,J) The assessment herein relates to 1993-94. The Revenue is on revision as against the order of the Tribunal. The issue herein relates to assessability of turnover under Section 3A of the Tamil Nadu General Sales Tax Act. The assessee herein is engaged in the business of offering publicity services. It had already put up structures and advertisement boards at their own cost in a leased https://hcservices.ecourts.gov.in/hcservices/ out premises. The assessee herein leased out its right to use the hoardings its structure to different companies during the currency of lease. The assessee submitted that even by allowing the parties to occupy the spaces for putting up advertisement boards, they would continue to have the possession and control over the property. There was no transfer of right to use goods as it had been contemplated under Section 3A of the Act. In the absence of any transfer or right to use any goods, the assessment was not justified. The Assessing Officer however rejected the contention of the assessee following the decision of the 89 STC 1 – SELVEL ADVERTISING PVT. LTD v. C.T.O., and thus made the assessment. Aggrieved by the same, the assessee went on appeal before the Appellate Assistant Commissioner who pointed out that the Assessing Officer had not indicated in his order as to how the elements of transfer, right to use and goods were present in assessee's case. The Appellate Authority further pointed out that since there was no transfer of possession and that the hoardings are part of the immovable property, the question of attracting charge under Section 3 A of the Tamil Nadu General Sales Tax Act did not arise. Thus, the Appellate Authority allowed the appeal filed by the assessee. 2. On further appeal by the Revenue before the Sales Tax Appellate Tribunal, the Revenue contended that considering the fact that the structure erected could be removed on the expiry of the term of lease, the structures could not be called as permanent one as an immovable property. In the circumstances, the Revenue contended that the turnover was liable to be assessed under Section 3A of the Act. The Tribunal considered the said contention in the light of the decision reported in 89 STC 1 – SELVEL ADVERTISING PVT. LTD v. C.T.O., and the Tamil Nadu Taxation Special Tribunal in its decision reported in 113 STC 403 – UPASANA FINANCE LIMITED v. STATE OF TAMILNADU, following the decision 89 STC 1 – SELVEL ADVERTISING PVT. LTD v. C.T.O., and on facts, held that the provisions of Section 3A of the Act were not attracted. The Tribunal pointed out that there was no transfer of possession of the hoardings which were erected on the earth on concrete foundation. In the circumstances, the hoardings thus being a part of immovable property. 3. Learned Special Government Pleader (Taxes) submitted that the assessee does not deny the fact that anybody in the advertisement business on contract basis could put up hoardings on behalf of the assessee. Considering the fact that the hoardings could be removed at any time, or at the expiry of term of lease, the hoardings in fact fall under Section 3A of the Act, referred to the decision of the Tamil Nadu Taxation Special Tribunal reported in 113 STC 403 – UPASANA FINANCE LIMITED v. STATE OF TAMIL NADU, pointed out that in the case of transfer of right to use, the essence of the transfer is the passage of control over the economic https://hcservices.ecourts.gov.in/hcservices/ benefit of the property. As the transfer of right to use the goods is a deemed sale, the transaction in question attracts Section 3A of the Act. In the light of the decision of the Tamil Nadu Taxation Special Tribunal, the assessee thus transferring its benefit to use the hoardings, provision of Section 3A of the Act stood attracted. 4. Per contra, learned counsel for the assessee pointed out that considering the findings of the Tribunal that the hoardings were part of the immovable property, levy of tax under Section 3A of the Act was rightly cancelled by the Tribunal. She also drew our attention to the decision of the Andhra Pradesh High Court reported in 18 VST 39 – STATE OF ANDHRA PRADESH v. PRKASH ARTS, holding that the nature of the transactions agreed upon need to be looked into to find out whether there was transfer of right to use. In the context of the decision of this Court and in the findings of the Tribunal, it is no longer open to the Revenue to contend that Section 3A of the Act is attracted. 5. Heard learned Special Government Pleader appearing for the Revenue and learned counsel for the assessee. 6. It is seen from the order of the Tribunal that it listed out the various aspect of the transactions of the assessee's business in the nature of putting up advertisement boards, which are as follows:- i) The hoardings are erected in the earth on concrete foundations. They cannot be removed without causing damage to hoardings. ii) Transferee is not physically possessing the hoardings. iii) Entire maintenance and upkeep of hoardings is done by respondent only. iv) The job of painting the designs or display matter is also done by the respondent. v) The respondent is also responsible for damages for fall of hoardings during heavy rain storm or anyother causes and respondent has to carry out necessary periodical repair work for keeping them in good conditions. vi) Entire licence charge to Chennai Corporation and insurance were paid by the respondent only. 7. In the context of the above factual aspect that the hoardings were erected on earth on concrete foundation that cannot be removed without causing damage to the hoardings, the Tribunal granted relief to the assessee. Thus the factual findings herein as to how the hoardings are used as part of the immovable property, certainly goes against the Revenue's plea herein. https://hcservices.ecourts.gov.in/hcservices/ 8. In the decision reported in 113 STC 403 – UPASANA FINANCE LIMITED v. STATE OF TAMIL NADU, the Tamil Nadu Taxation Special Tribunal considered the vires of Section 3 A of the Act. While upholding the provisions of Section 3A of the Act, the Tribunal pointed out that in the case of transfer of right to use, the essence of the transfer is the passage of control over the economic benefit of the property. In other words, there must be a transfer or effective control over the goods that the other party is able to exploit economic benefit over the same. Since the transfer of right to use the goods is a deemed sale, the rent paid for the use of the goods can certainly be the basis for the levy of tax. In the circumstances, whether there was any goods in respect of which, there was a transfer of right to use, hence has to be seen before fastening any liability. In order to attract the provisions of Sales Tax enactments, on the transfer of right to use the goods, there should be delivery of goods and freedom to use such goods. The Special Tribunal further pointed out that ultimately the term of the contract between the assessee on one hand and the customers on the other hand would establish whether there was transfer of right to use any goods to attract the Section 3A of the Act. In that context, the Tribunal held that each case has to depend upon the facts. Ultimately, it is the Officer who has to go into the issue. Consequently, the Special Tribunal directed all the cases to be decided in terms of the materials available. The Tribunal further pointed out to the decision reported in 89 STC 1 – SELVEL ADVERTISING PRIVATE LIMITED v. COMMERCIAL TAX OFFICER, ALIPORE CHARGE, the case relating to the erection of hoardings wherein the West Bengal Special Taxation Tribunal rejected the arguments that it was an immovable property. Further in that case it was found that there was nothing to show that possession and control of the hoardings and structure remained with the assessee during the period of contract. Thus, the decision referred to above laid down as a matter of principle of law that only goods can be a subject matter of sale as well as of a deemed sale. In order to bring the transaction under the provisions of Section 3A relating to transfer of right to use the goods, the transferee must have control over economic benefit of the property, in which event, the possession also has to be with the transferee. In the absence of any elements, viz., the goods, the transfer of right to use the goods, the said transaction could not be bring under the provisions of Section 3A of the Act. 9. As already pointed out by us, the findings of the Tribunal herein remain unchallenged. The Tribunal held that the hoardings are part of the immovable property which are not dismantled to be called as goods. There is nothing on record to show that the hoardings were detachable and remained as goods to be used as and when they were required for the assessee to render its services as an advertisement agency. The hoardings erected on the concrete https://hcservices.ecourts.gov.in/hcservices/ foundation not capable of removal without causing any damage to the structure is part of the immovable property and ceased to be goods for the purpose of attracting levy of tax under Section 3A of the Act. In the light of the factual findings of the Tribunal, we have no hesitation in dismissing the case of the Revenue. It would be a totally different case if the hoardings are detachable and to be given for use by the assessee as and when required. When the facts herein are otherwise, we have no hesitation in confirming the order of the Tribunal. 11. In the result, the tax case revision is dismissed. No costs. Sd/- Asst.Registrar. /true copy/ Sub Asst.Registrar. bg To 1. The Deputy Commissioner (CT) Chennai (Central) Division Chennai 600 006 2. Tamil Nadu Sales Tax Appellate Tribunal, Additional Bench, Chennai 3. The Dy. Commercial Tax Officer, Vepery Assessment Circle, 3. Rithordon Avenue Chennai-7 1 cc t Mr.K.J. chandran, advocate, Sr. 40121 1 cc to Spl. Government Pleader, Taxes, Sr. 40183 TC (R). No. 430 of 2006 VSN (CO) kk 1/8 https://hcservices.ecourts.gov.in/hcservices/