TMI Blog1972 (10) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... the period 1st September, 1964, to 31st March, 1965, and dismissed in respect of the 1st period, 1st April, 1964, to 31st August, 1964, and with respect to canteen sales the appeal is dismissed in respect of the 1st period, 1st April, 1964, to 31st August, 1964, and allowed in respect of the second period, 1st September, 1964, to 31st March, 1965, and the matter remanded. - C.A. Nos. 2119, 2120 of 1969, - - - Dated:- 10-10-1972 - HEGDE K.S., JAGANMOHAN REDDY P. AND KHANNA H.R. JJ. T.A. Ramachandran, Advocate, for the respondent in C.A. No. 2119 of 1969. S.T. Desai, Senior Advocate (Mrs. A.K. Verma, Advocate, for J.B. Dadachanji and Co., Advocates, with him), for the respondent in C.A. No. 2120 of 1969. P. Ram Reddy, Senior Advocate (A.V. Rangam and Miss A. Subhashini, Advocates, with him), for the appellant. -------------------------------------------------- The judgment of the court was delivered by JAGANMOHAN REDDY, J.- These are two appeals by special leave against the judgment of the Madras High Court. In Appeal No. 2119 of 1969 the chargeability to sales tax under the Madras General Sales Tax Act, 1959 (hereinafter called the "Act") as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Coimbatore Division, Coimbatore v. Sri Thirumagal Mills Limited [1967] 20 S.T.C. 287. It may be mentioned that in the original Act, viz., the Madras Sales Tax Act, 1939, "dealer" was defined as meaning any person who carried on the business of buying and selling goods. In that Act there was no definition of a casual dealer nor of business. The 1959 Act defined these terms for the first time and by the amending Act of 1964 the definition of business was substituted so as to do away with motive for making profit or the making of profit as elements in determining what constitutes a business. Even the definition of casual trader in the 1959 Act was substituted by the amending Act in 1961. These definitions are given below one against the other for facility of comparison: 1959 ACT AFTER THE 1961 AND 1964 AMENDMENT ACT Section 2(d). " 'business' includes Section 2(d). "'business "includes any trade, commerce or manufacture (i) any trade, commerce or manufacture or any adventure or concern in facture or any adventure or concern the nature of trade, commerce or in the nature of trade, commerce or manufacture, whether or not any manufacture, whether or not such profit accrues f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment is also covered by the 1964 amendment. But the learned Advocate for the appellant none the less submits that even under the 1959 Act before its amendment the transactions which are incidental or ancillary to trade or commerce whether or not profit has been made, are liable to tax. This contention was clearly negatived in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 S.T.C. 1 (S.C.)., In this case which was under the Bombay Sales Tax Act, 1953, where the definition of a dealer under section 2(6) is in Pari materia with section 2(g), the disposal by a company carrying on the business of manufacturing and selling cotton textiles of its miscellaneous old and discarded items such as cans, boxes, cotton ropes, rags, etc., was held by this court not to be carrying on the business of selling these items of goods. It further stated that from the fact that the sales of these items were frequent and their volume was large, it cannot be presumed that when the goods were acquired there was an intention to carry on the business in those discarded materials, nor are the discarded goods by-products or subsidiary products of or arising in the course of manufacturing pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of trader or commerce and accordingly the definition of "business" in the second clause was still one invested with commercial character inasmuch as the reference was to "any transaction in connection with or incidental or ancillary to any trade, commerce, manufacture, adventure or concern". It was observed that unless the transaction is connected with trade, that is to say, it has something to do with trade or has the incidence or elements of trade or commerce it will not come within the definition. The court observed: "The words 'in connection with or incidental or ancillary to' in the second part of the definition of 'business', in our opinion, still preserve or retain the requisite that the transaction should be in the course of business understood in a commercial sense. The intention of Madras Act 15 of 1964 does not appear to be to bring into the tax net a transaction of sale or purchase which is not of a commercial character." In this view it held that the fair price shop which the assessee, a spinning mill manufacturing cotton yarn, had opened to make available to its workmen sale of commodities at fair prices could not be said to be carrying on the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or concern" of which a motive to make gain or profit is not an essential requisite, nor was it permissible to hold that there was no "business" in the commercial sense of "business" with a motive to make profit, when such motive has been expressly declared unnecessary by the Legislature. In their view under both parts of the definition profit-motive is now immaterial and the concept of business in respect of matters falling under section 2(d)(ii) in the commercial sense put forward and accepted in the earlier cases must be abandoned. We think the view adopted by the Andhra Pradesh High Court is in consonance with our own reading of the section which we have indicated earlier. The learned Advocate for the respondent in the second of the appeals contended that the very two learned judges of the Andhra Pradesh High Court had earlier rendered a decision in A.P. State Road Transport Corporation v. Commercial Tax Officer [1971] 27 S.T.C. 42., which is in conflict with the Hyderabad Asbestos Cement Products Ltd. case [1972] 30 S.T.C. 26., and in the latter case the former case was neither referred to nor distinguished by them. We think that this comment is the result of an insufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be presumed that when the goods were acquired, there was an intention to carry on business in those discarded materials nor are the discarded goods by-products or subsidiary products or are produced in the course of manufacturing process; that they are either fixed assets of the company or are goods which are incidental to the acquisition or use of stores or commodities consumed in the factory and that when these go into the profit and loss account of the business and may indirectly be said to reduce the cost of production of the principal item, the disposal of those goods on the account cannot be said to be part of or incidental to the main business of selling textiles. As the scrap in that case was not held to be incidental to the acquisition or use of stores or commodities consumed in the factory, the turnover was not included but in the case of caustic liquor which is regularly and continuously accumulated in the tanks in the process of mercerisation of cloth, this court held that that being a waste material it has still a market amongst other manufacturers or launderers as by-products or subsidiary products in the course of manufacture, and the sale thereof is incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to state what other records he required but he did not raise this point during the checking of the accounts. In support of this grievance a letter of the assessee's Advocate to the officer was referred. In that letter it was stated that out of the turnover of Rs. 35,974.96 in respect of the canteen sales, the assessee had supplied free tea to the staff of the value of Rs. 13,740.37. It was further mentioned in that letter that the assessee bears the expenses towards salaries and amenities provided for the employees in the canteen as also the electric charges and corporation taxes. It also provides free of charge all equipment including furniture and fittings and a rent-free building for this canteen. It therefore prayed that the turnover be exempted under the aforesaid G. O. Neither the Appellate Assistant Commissioner nor the Sales Tax Tribunal considered this aspect nor did the assessee pray for producing any evidence before them. We think as the assessee had sufficiently brought to the notice of the Sales Tax Officer its claim and was willing to produce accounts it should be permitted to do so. The Sales Tax Tribunal will give an opportunity to the assessee to produce evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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