14 January 2015

Sale of used motor vehicles – Exemption under Delhi VAT

Sale consideration received on resale of used motor vehicle to third parties by dealers of different commodities is not includible in the taxable turnover for attracting liability under Delhi VAT provisions if conditions of Section 6(3) of DVAT Act are satisfied. The Delhi High Court, in the case of Anand Decors v. Commissioner, while holding so looked into the definitions of the terms ‘business’, ‘capital goods’, non-creditable goods’ and ‘sale price’ while discussing at length Section 6 and Section 9 of the DVAT Act. Drawing its attention to Section 6(3) relating to exemption from VAT, the court enlisted conditions required to claim benefit thereof. It was observed that for such exemption, there should be sale of capital goods, the said capital goods should have been used by the dealer from the time of purchase till sale, the capital goods should have been used for making sale of taxable goods or taxable and non-taxable goods, and the dealer should not have taken tax credit in respect of such capital goods under Section 9.

The court in this regard also held that the language used in the definition of capital goods under Section 2(f) as well as Section 9(1) is wide enough to cover the goods in question. Further, department’s plea that to be eligible for exemption under Section 6(3), the assessee should have voluntarily not taken credit though eligible for it was also rejected by the court.

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