1. The only question for consideration in this petition is, whether the petitioner, an Industrial Co-operative Society, is liable to pay any sales tax in respect of the hire-purchase transactions entered into by it with its members.
2. The proved facts of the case are that the petitioner supplies machinery to its members on hire-purchase basis. In its turn, it gets machinery from a Bombay firm known as the National Small Industries Corporation (Bombay) Private Ltd., on hire-purchase basis. During the assessment year 1958-59, the petitioner had entered into 11 hire-purchase agreements. The hire-purchase amounts received during that year under those agreements, amounted to Rs. 1,44,681. This sum was assessed to sales tax under section 5(3)(a) of the Mysore Sales Tax Act, 1957. The validity of that assessment is challenged by the petitioner.
3. Explanation I to section 2(t) of the Act says :
'A transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains the title in the goods as security for payment of the price, be deemed to be sale.'
4. In view of this explanation, the Sales Tax Officer held that the transactions covered by the hire-purchase agreements in question amounted to 'sales'. Consequently, he levied sales tax on the turnover relating to those transactions. The question for decision is whether the explanation in question is ultra vires of the powers of the State Legislature. The said explanation is ad idem with explanation I to section 2(h) of the Madras General Sales Tax Act, 1939. The validity of the latter provision came up for consideration before the Supreme Court in Civil Appeals Nos. 245 and 246 of 1963 (K. L. Johar & Company v. The Deputy Commercial Tax Officer (Since reported at  16 S.T.C. 213.)). The Supreme Court held that the said provision was void as the Legislature had no competence to enact the same. Therefore, we have to hold that explanation I to section 2(t) of the Mysore Sales Tax Act, 1957, is also void and inoperative. From this conclusion it follows that the turnover relating to the hire-purchase transactions, with which we are concerned in this case, could not have been brought to tax.
5. In the result, this petition is allowed and the sales tax imposed on the turnover relating to the hire-purchase transactions is hereby quashed.
6. As this petition is allowed on a ground which was not taken up in the petition, we make no order as to costs.
7. Petition allowed.