The Allahabad High Court has held that the financier of motor vehicle entering lease agreement is liable to pay motor vehicle tax.
The bench of Justice Shekhar B. Saraf and Justice Manjive Shukla has relied on the decision of the Supreme Court in the case of Mahindra and Mahindra Financial Services Ltd. vs. State of U.P. and others in which it was held that a financier of a motor vehicle or transport vehicle who has entered into hire-purchase agreement or lease or hypothecation agreement will be liable to tax from the date of taking possession of the vehicle under the agreement.
Background
The petitioner had purchased a Tata Magic (commercial vehicle). The vehicle was hypothecated with Hinduja Leyland Finance Limited. On account of default in repayment of loan, the vehicle was seized by the financier in the year 2013 and was sold.
Upto the date the petitioner was in possession of the vehicle he had deposited the tax. After possession of the vehicle was taken by the financier, the liability of the tax cannot be put on the petitioner as in that case the financier will be liable to pay the tax.
The facts have been stated by the petitioner in the objections filed to the recovery citation, however, not considered.
Arguments
The petitioner relied on the decision of the Supreme Court in Mahindra and Mahindra Financial Services Ltd. vs. State of U.P. and others and contended that the financier is liable to pay the tax as the vehicle is in the possession of the financier.
The department contended that in terms of Rule 18 of the U.P. Motor Vehicles Taxation Rules, 1998, the petitioner was required to inform the Taxation Officer about the fact that the possession of the vehicle was taken by the financier and the tax liability was fastened on the financier. As the petitioner had failed to do so, demand was raised against him.
Conclusion
The court held that the possession of the vehicle was taken by the financier in April, 2022 and the liability for payment of tax cannot be fastened on the petitioner.
The court stated that in terms of Rule 18 of the U.P. Motor Vehicles Taxation Rules, 1998, the petitioner had already filed an objection against the notice mentioning that possession of the vehicle in question was taken by the financer in the year 2013. The vehicle was sold by the financer. The objections are required to be considered by the competent authority and from the date of possession of the vehicle was taken by the financer, the liability may be re-worked out in terms of judgement of the Supreme Court in Mahindra and Mahindra Financial Services’ case. However, for any period prior to that, if the tax has not been paid, the petitioner shall be liable to pay the same.
Case Title: Dileep Kumar Upadhyay Versus State
Case No.: Writ Tax No. 1323 Of 2024
Date: 02.09.2024
Counsel For Petitioner: Abhishek Shukla
Counsel For Respondent: C.S.C.
