TMI Blog1967 (4) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... 1966 - - - Dated:- 24-4-1967 - SHAH J.C., SIKRI S.M. AND RAMASWAMI V. JJ. R. Ganapathy Iyer Dr. V.D. Mahajan and S.P. Nayyar, for the appellant. B. Sen, Senior Advocate (P.K. Chatterjee and G.S. Chatterjee for P.K. Bose with him), for the respondent. -------------------------------------------------- The judgment of SIKRI and RAMASWAMI, JJ., was delivered by RAMASWAMI, J. SHAH, J., delivered a separate judgment. SHAH, J. -I regret my inability to agree with the view expressed by Ramaswami, J. Section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, defines a "dealer" as meaning "any person who carries on the business of selling goods in West Bengal and as including the Government". The Government of India set up an organisation-the Directorate of Disposals (United States Transfer Directorate)-to dispose of war equipment taken over by them from the American forces after the Second World War. This organisation had several branches under its control. A part of the equipment was appropriated by the Government of India to their own use; some equipment was sold to the State Governments and other autonomous bodies; and the rest was sold to the public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have entered into an activity in the nature of business or trade. The line between the two classes of cases Is thin and sometimes may be blurred. But in the present case, It cannot be said that the activity undertaken by the Government of India for disposal of the American surplus war equipment was merely an activity of the nature of realization of capital. There was an organised course of activity, it was systematic and it was with a set purpose of making profit. The tests of frequency, continuity and system which are generally employed In determining whether an activity for the disposal of goods owned by a person indicates an Intention to carry on business are satisfied In this case. The inference does not arise merely from the existence of a selling organisation or systematic sales, but from the totality of circumstances. In Commissioner of Taxes v. British Australian Wool Realization Association Limited [1931] A.C. 224., the Judicial Committee was called upon to consider whether surplus resulting from sale of wool acquired for the purpose of the First World War was exigible to income tax under the Income Tax Act, 1915 (Victoria, 6 Geo. 5 No. 2668). The judicial Committee ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth Government. There was a separate agreement between the British Government and the company about the disposal of wool belonging to that Government. Interest of the Commonwealth Government in the surplus wool-a sum exceeding 6 million-was transferred to the company, and it became an instrument of conversion of the whole of the surplus wool still un- sold. For the share of the Commonwealth Government in the wool it became a medium of distribution of the net surplus amongst the original suppliers of wool. The company also took over the organisation under which the realization of wool was proceeding for over two years before it was set up, "and a realization of surplus wool whose sole or even primary purpose was the acquisition of gain, whether by the Imperial Government in respect of one moiety, or by the Association or its members in respect of the other was never again entertained". The judicial Committee observed at page 249: "...........in truth and in fact the Association's interest in the wool always was fixed capital and never was circulating capital. Its purpose with reference to It was to realize the asset, having done so to distribute the proceeds among those entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s responsible for the disposal of surplus American war equipment which had been taken over by the Government of India. When the equipment was substantially disposed of, its work was reduced to a great extent and therefore it merged with the office of the Regional Commissioner (Disposals) on January 11, 1950. Later on the Supply and Disposals Services of the Government of India were merged and the department was redesignated as Directorate of Supplies and Disposals. The function of this Directorate was to dispose of surplus goods and to purchase goods on behalf of the Government of India. The Director of Supplies and Disposals (hereinafter called the "appellant") was asked by the sales tax officials of the West Bengal Government to get himself registered as a "dealer" under the Act. The appellant declined to do so, contending that he was not a "dealer" and that he was not engaged in the business of buying and selling and was there- fore not liable to pay any sales tax, but the contention of the appellant was overruled and he was assessed to sales tax for three periods from April 1, 1949, uptil May 31, 1951. The appellant took the matter in appeal to the Assistant Commissioner of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which were offered for sale were advertised in the newspapers and auctions were also held from time to time. As pointed out by this Court in State of Andhra Pradesh v. M/s. Abdul Bakshi and Bros. [1964] 15 S.T.C. 644., a person to be a dealer must be engaged in the business of buying or selling or supplying goods. The expression "business" though extensively used in taxing statutes, is a word of indefinite import. In taxing statutes, it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive; there must be some real and systematic or organised course of activity or conduct with a set purpose of making profit. To infer from a course of transactions that it is intended thereby to carry on business, ordinarily there must exist the characteristics of volume, frequency, continuity and system indicating an intention to continue the activity of carrying on the transactions for a profit. But no single test or group of tests is decisive of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by sale of surplus unserviceable or discarded goods does not necessarily lead to an inference that business is intended to be carried on in those goods and the fact that unserviceable goods are sold and not stored so that badly needed space is available for the business of the assessee also does not lead to the Inference that business is intended to be carried on in selling those goods." Having examined the facts found by the High Court In the present case, we are satisfied that the appellant was not carrying on the business of buying or selling goods within the meaning of section 2(c) of the Act. It is not disputed that large quantities of war material were handed over to the Government of India under the provisions of the Indo-U.S. agreement for the prosecution of the war. A part of the war material was used by the Government for defence and military activities and there was a huge surplus left with the Government of India which was either no longer useful or had become obsolete. We are of the opinion that in disposing of this surplus war material the appellant was not carrying on the business of selling goods and the transactions of sale were not liable to be taxed under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their view of the facts here, a case entirely within the terms of the following words from the judgment in Californian Copper Syndicate v. Harris (1904) 5 Tax Cas. 159, 165., which have since been so often cited with approval: 'It is quite a well- settled principle in dealing with questions of assessment of income tax, that where the owner of an ordinary investment chooses to realize it, and obtains a greater price for It than he originally acquired it at, the enhanced price is not profit.........assessable to Income tax.' Equally applicable, in the view of their Lordships, are the words of Lord Dunedin in Commissioner of Taxes v. Melbourne Trust [1914] A.C. 1001, 1009., where he says: 'If the liquidator of one of the banks had made an estimate of the various assets held by him for realization, and then on realization had obtained more than that estimate, such surplus would not have been profit assessable to income tax.'" Lord Blanesburgh further observed at page 252 of the report: "All that its British board did was to utilize on its behalf the organization under which they had acted when, as a committee of the Ministry of Munitions, they were engaged in the same task of reali ..... X X X X Extracts X X X X X X X X Extracts X X X X
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