They Taxed It As A Transfer Of Goods. Nothing Was Transferred.
Bus owners who hired vehicles to a State transport undertaking were assessed to sales tax. The High Court applied the five tests and found the transaction outside the net entirely.
The Court held that on the five tests laid down in Bharat Sanchar Nigam Ltd., and on a plain reading of the agreements, the transactions are not exigible to tax as there is no transfer of the right to use goods. The assessment orders are therefore without jurisdiction and unsustainable, and were quashed. A service tax notification separately exempts hiring a motor vehicle carrying more than 12 passengers to a State transport undertaking.
- Possession and effective control are the heart of it. Without them passing, there is no transfer of the right to use.
- The agreement decides it — the Court read the terms plainly rather than the label.
- Without jurisdiction, not merely wrong, which is why a writ lay at all.
- The service tax side is exempt too, for vehicles meant to carry more than twelve passengers hired to a State transport undertaking.
- Court
- High Court of Andhra Pradesh at Amaravati
- Bench
- Justice NINALA JAYASURYA, Justice T.C.D.SEKHAR
- Citation
- W.P. Nos. 253 of 2021 and 17913 of 2025
- Case
- W.P. Nos. 253 of 2021 and 17913 of 2025
- Decided
- 3 September 2026
- Outcome
- Writ petitions allowed; assessment orders quashed
The test applied
The Court applied the five tests laid down by the Supreme Court in Bharat Sanchar Nigam Ltd. for deciding whether there has been a transfer of the right to use goods.
On those tests, and on a plain reading of the terms and conditions of the agreements in question, the transactions are not exigible to tax, because there is no transfer of the right to use goods.
The consequence
The impugned assessment orders are therefore without jurisdiction and unsustainable.
The Court also noted the service tax notification of June 2012, effective from 1 July 2012 and applicable to one of the petitioners, which exempts services by way of giving on hire to a State transport undertaking a motor vehicle meant to carry more than twelve passengers from the whole of the service tax leviable.
The assessment orders passed against the petitioners were quashed and the writ petitions allowed, with no costs.
Who argued it
Appearances as recorded in the judgment of the Court.
Frequently asked
Is hiring out a vehicle taxable as a transfer of the right to use goods?
Not where possession and effective control do not pass. On the BSNL tests these transactions were held outside the tax.
Why could a writ petition be filed instead of an appeal?
Because the assessment orders were held to be without jurisdiction, not merely erroneous.
Testing whether a hire is a transfer of the right to use
- Work through the five BSNL tests one at a time against the actual agreement.
- Show who retains possession, control, crew and responsibility during the hire.
- Where the order is without jurisdiction rather than merely wrong, say so — that is what opens the writ route.
- Check the parallel service tax exemptions; they can dispose of the other half of the exposure.
Source. High Court of Andhra Pradesh at Amaravati, W.P. Nos. 253 of 2021 and 17913 of 2025, decided 3 September 2026 by Justice NINALA JAYASURYA, Justice T.C.D.SEKHAR. This explainer is written from the judgment text as reported.
Claw tracks High Court of Andhra Pradesh at Amaravati and 24 other High Courts, reads every order handed back, and surfaces the directions that carry a deadline. clawlaw.in