SDE Engineers Ltd. v. Commercial Tax Officer

Introduction

• The petitioners developed and leased commercial IT parks to corporate tenants.
• The lease included office premises along with furniture, fixtures, parking, cafeteria, lifts, air-conditioning, DG backup, fire safety systems, sewage treatment plants and other common facilities.
• Lease rent was charged as a single composite amount on a per square foot basis.
• No separate consideration was charged for furniture or movable assets.
• The Commercial Tax Department treated the portion relating to movable assets as a transfer of right to use goods under Section 5E of the APGST Act and levied sales tax.
• The demand was upheld by the Assessing Officer, Appellate Authority, Deputy Commissioner and the Tribunal.
• The assessee challenged the levy before the High Court.

Issue

Whether lease rentals attributable to furniture, fixtures, equipment and common amenities provided along with commercial office premises constitute a transfer of the right to use goods (deemed sale) liable to sales tax under Section 5E of the APGST Act?

Assessee’s Contentions

• The lease was for commercial premises as a whole.
• Furniture and amenities were merely incidental to the lease.
• No possession or effective control of movable goods was transferred.
• Common facilities remained under the landlord’s management.
• Composite lease rent could not be artificially bifurcated into movable and immovable components.

Department’s Contentions

• Furniture, fixtures, kitchen equipment and other movable assets were provided to tenants.
• Consideration attributable to these movable assets amounted to transfer of the right to use goods.
• Such transfer constituted a deemed sale taxable under Section 5E.

High Court’s Findings

The Court relied upon the principles laid down in: