Meaning of ‘transfer of right’ to use goods
‘Transfer’ must necessarily be accompanied by the hand from which and the hand to which something is to be transferred, that is to say, ‘transfer’ must carry with it ‘from’ and ‘to’. If either of them is wanting, there can be no transfer. – Deepchand Gulabchand Naik v. MPSRTC AIR 1977 MP 42 = 1971 MPLJ 667 * Samson John v. TRO (2008) 169 Taxman 227 (Bom HC DB).
The word ‘transfer’ as used in ‘Transfer of Property’, ‘Transfer of Shares’ indicates that after such ‘transfer’, the transferor loses possession of or right over the goods transferred (may be temporarily or permanently) and transferor gets exclusive rights over the article or thing transferred.
Mere transfer of right to use for consideration is sufficient. Transfer of goods itself is not necessary – Aggarwal Brothers v. State of Haryana (1999) 9 SCC 182 = 113 STC 317 (SC) [In this case, appellants used to supply shuttering to builders and contractors or hire] – – quoted in Sri Jay Kumar Bardia v. State of Assam (2007) 5 VST 210 (Gau HC), also quoted with approval in State of Orissa v. Asiatic Gases (2007) 5 SCC 766 =7 VST 531 (SC).
In 20th Century Finance Corporation Ltd. v. State of Maharashtra 2000 AIR SCW 2514 = (2000) 6 SCC 12 = 119 STC 182 = AIR 2000 SC 2436 (SC 5 member bench – 3 v. 2 order), it was held that if situs of sale has not been fixed or covered by any legal fiction, situs of sale would be where the property in goods passes, namely where the contract is entered into. [Thus, place where right to use goods is transferred (i.e. where agreement to transfer right is executed) is relevant for purpose of taxability, and not the place where goods are transferred] – followed in SandanVikas (India) Ltd. v. State of Haryana (2013) 59 VST 160 (P&H HC DB) * SandanVikas (India) Ltd. v. State of Haryana (2013) 59 VST 165 (P&H HC DB).
‘Transfer’ is different from ‘allowed to use’ or ‘permitted to use’ or ‘right to access’ – ‘Transfer’ implies some exclusiveness to the transferee. For example, if a person boards a bus, can it be said that the bus owner has ‘transferred’ right to use bus to the passenger? The bus owner has only ‘allowed’ or ‘permits’ or ‘allows access to’ the use of bus to the passenger on non-exclusive basis.
Regarding taxability of ‘Hire of goods’, it has been consistently held that hire is taxable only when exclusive possession is transferred to the hirer, as per case law below.
Undertaking data processing is not transfer of right to use goods, unless physical control is transferred to customer – In CST v. Rolta Computer (2009) 25 VST 322 (Bom HC DB), the dealer was engaged in business of computer data processing. They undertook work of processing quotations, inventory and financial accounting applications of ONGC. The work was done by dealer and the computers were never delivered or handed over to ONGC. During fixed time, staff members of ONGC would come to office of dealer and get work done through employees of dealer. It was held that since physical control or possession was never handed over to ONGC, it is not transfer of right to use goods.