2026-VIL-1031-CHG
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VAT High Court Cases

Chhattisgarh VAT Act 2005 - Taxability of lease rent received from Railways for wagons under ‘Own Your Wagon Scheme’ - Deemed sale and transfer of right to use goods - Assessment authorities and appellate authorities treated lease rent as taxable supply involving deemed transfer of right to use - Whether lease rent received by assessee from Railways in respect of wagons provided under the Central Government's ‘Own Your Wagon Scheme’ constitutes a taxable supply involving transfer of right to use goods under Section 2(s)(vi) read with Section 22 of Chhattisgarh VAT Act - HELD - The Supreme Court in the case of 20th Century Finance Corporation and Great Eastern Shipping Company has laid down the principle that for taxation purposes a distinction must be maintained between tangible transfer of goods and contractual arrangements relating to right to use. The principle of law laid down by the Supreme Court in 20th Century Finance Corporation squarely applies to the present case - The lease rent paid by the Railways to the assessee in respect of wagons provided under the Own Your Wagon Scheme cannot be accepted to be taxable income under the statutory provisions of Section 2(s)(vi) read with Section 22 of the Act. The fact that the wagons were manufactured and handed over to the Railway Authorities in Rajasthan and West Bengal does not attract taxation in Chhattisgarh. The inter-State delivery of goods and the nature of the arrangement preclude taxability under the State VAT Act. The provisions contained under Section 2(s)(vi) read with Section 22 of the Act will not be attracted and the Assessment Authorities erred in subjecting the lease rent to tax - The lease rent received by the assessee from Railways for wagons provided under the ‘Own Your Wagon Scheme’ is not taxable under Section 2(s)(vi) read with Section 22 of Chhattisgarh VAT Act – The Tax References are disposed of
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