Financier to pay tax on seizing hypothecated commercial vehicle: Supreme Court

NEW DELHI: The Supreme Court has ruled that if a financier takes possession of a hypothecated commercial vehicle for default in repayment of loan, then the financier and not the owner of the vehicle, would be liable to pay advance tax under Motor Vehicle Taxation Act.
A bench of Justices M R Shah and B V Nagarathna gave this verdict dismissing an appeal filed by Mahindra and Mahindra Financial Services, which had pleaded that though it had taken possession of the commercial vehicle on default of repayment of loan, for all purposes the commercial vehicle remained registered in the name of the owner and he alone should be liable for payment of tax under the law.
Writing the judgment, Justice Shah said a financier like the appellant, who is in possession of the transport vehicle in question owing to non-payment of the loan amount, is an 'owner' under the relevant provisions of the Act.
Under the law concerning commercial or transport vehicles, the tax is to be paid in advance as monthly tax or yearly tax and only thereafter such payment the vehicle could be put to use. The law also provided that if after payment of the advance tax, the transport vehicle is not used for a continuous period of one month or more since the last payment of tax, the owner may apply for the refund.
The bench ruled that "a financier of a motor vehicle/transport vehicle in respect of which a hire-purchase or lease or hypothecation agreement has been entered, is liable to (pay) tax from the date of taking possession of the said vehicle under the said agreement. If, after the payment of tax, the vehicle is not used for a month or more, then such an owner may apply for refund."

The Open Magazine of India by Artmotion Network (

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