1964 (7) TMI 30 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Assessment of sales tax on the sale of a cinema projector.
2. Assessment of sales tax on the sale of the negative film "Tour of Mahatma Gandhi."

Issue-wise Detailed Analysis:

1. Assessment of Sales Tax on the Sale of a Cinema Projector:
The assessee contended that the cinema projector, purchased in 1946 and used for several years for exhibiting educational films, should be exempt from sales tax when sold. The argument was based on the premise that the projector was treated as a capital good by Income-tax Authorities, allowing depreciation. The assessee argued that such sales should be dissociated from his business activity.

The court reviewed several precedents to determine whether the sale was part of the business activity. In Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Sri Lakshmi Saraswathi Motor Service, it was held that isolated transactions of selling unserviceable buses did not make the assessee a dealer in buses. Similarly, in State of Bombay v. Ahmedabad Education Society, the court held that selling surplus bricks did not constitute carrying on the business of selling or supplying goods.

However, the court found that the intention to sell projectors was present when the assessee acquired them. The court emphasized that the interval of time during which the projectors were used for exhibitions did not negate the intention to sell them when advantageous. The court cited Ebrahim & Co. v. The State of Bombay, where the sale of a ship was deemed part of the business activity due to its reasonable connection with the business.

The court concluded that the sale of the projector had a reasonable connection with the assessee's business activities, and the essential ingredients of a sale in the course of business activity existed. Therefore, the sale of the projector was subject to sales tax.

2. Assessment of Sales Tax on the Sale of the Negative Film "Tour of Mahatma Gandhi":
The assessee argued that the sale of the negative film, taken in 1946 and sold after eight years, was not in the course of business. The film was used to produce positives for sale, and the negative was eventually sold to Gandhi Samarak Nidhi for preservation.

The court examined the nature of the assessee's business, which involved selling cinematographic goods, including positives of films. The court noted that the assessee's business was carried on with a profit motive, and the sale of positives was part of this business. The court found that the sale of the negative film had a reasonable connection with the assessee's business activities. The court cited United Bleachers Ltd. v. State of Madras, where the sale of packing materials used in the business was deemed part of the business activity.

The court concluded that the sale of the negative film was part of the assessee's business activity, as the profit motive was present, and the sale had a reasonable connection with the business. Therefore, the sale of the negative film was subject to sales tax.

Conclusion:
The court dismissed the revision case, upholding the assessment of sales tax on both the sale of the cinema projector and the sale of the negative film "Tour of Mahatma Gandhi." The court found that both sales were reasonably connected to the assessee's business activities and were conducted with a profit motive, thereby attracting the levy of sales tax. The petition was dismissed with no order as to costs.