TMI Blog1976 (3) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the agreement, the assessee sold all the raw materials which she had, as listed in appendix A to the agreement, for the prices mentioned therein. Similarly, she sold the semi-finished products and finished products listed in appendix B for the prices mentioned in that appendix. The finished products included in this appendix did not exhaust the stocks which she held, but only a portion of it was given to TEMM and the remaining was retained by her for the purpose of sale in the areas other than four States in respect of which TEMM was given the exclusive right. Under that agreement, the assessee also transferred all the tools, jigs, fixtures, furniture and other items as listed in appendix C on their book value which is also mentioned in that appendix. For the assessment year 1970-71, the assessee returned a total and taxable turnover of Rs. 1,746.09 (sic) and Rs. 1,528 respectively. On the ground that the raw materials listed in appendix A to the agreement and the semi-finished products and finished products listed in appendix B thereto were sold by the assessee during the assessment year, the assessing officer sought to include a sum of Rs. 1,59,753.85 in the taxable turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng become a mere investment of a dead business activity. In other words, the Tribunal seems to think that the knowhow is given first and by reason of it, the manufacturing activity of the assessee had come to a dead-end and the sale of the raw materials, semi-finished and finished products takes the next place, when she was no longer a dealer in the manufacture and sale of standard cells. Thus, according to the Tribunal, at the time when the sale was made, the assessee was not manufacturing the standard cells and the goods sold were freezed assets. Thus, both on the ground that it was a sale of the capital assets and, therefore, could not be treated as a sale in the course of business and also on the ground that the sale was after she had ceased to do any business, the Tribunal held that the entire turnovers relating to appendix A and appendix B were not liable to be included in the gross turnover. It is questioning this view of Tribunal, the revenue has filed T.C. No. 287 of 1974. In the other tax revision case, the assessee was the erstwhile Burmah Shell Oil Storage and Distributing Co. of India Ltd., which is now taken over and designated as Bharat Refineries Limited. The disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of scrap also was included in the taxable turnover. The assessee is the petitioner in this revision case. The learned counsel appearing for the assessees in both these cases strenuously contended that the sale of capital assets could not be deemed to be either a sale in the course of business or a sale incidental or auxiliary to the business of the assessees and the decision of the Supreme Court in State of Tamil Nadu v. Burmah Shell Co. Ltd.[1973] 31 S.T.C. 426 (S.C.). could not be applied to a case of sale of capital assets. It was also the case of the learned counsel that a transaction could be said to be incidental or auxiliary to the trade, commerce, manufacture, adventure or concern carried on by the assessee, only when such activity promotes or aids the business of the assessee and not when they were sold as unserviceable or obsolete material no longer required for the purpose of the business. The learned counsel also wanted to interpret and understand the amended definition of section 2(d) of the Tamil Nadu General Sales Tax Act in its historical background and with reference to the mischief sought to be remedied by the amendment. So read, according to the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that sales of capital assets could not be included in the gross turnover even as incidental or ancillary transaction is apparent, if we look into the facts of the case in State of Tamil Nadu v. Burmah Shell Co. Ltd.[1973] 31 S.T.C. 426 (S.C.). The three different turnovers involved in that case are these: (i) the turnover relating to supply of tea and edibles to the workmen in the canteen established by the company; (ii) the turnover of sales of advertisement materials such as calendars, purses and key chains; (iii) the turnover relating to sales of scrap such as unserviceable oil drums, rubber hoses, jerry cans, rims, unserviceable pipe fittings and old furniture. The Supreme Court held that the sale of advertisement materials and all those items characterised under the heading of scrap including old furniture were liable to be included in the gross turnover. This was in the view that, even in respect of transactions falling under section 2(d)(ii), the concept of transaction in the commercial sense with profit-motive is not essential. We may also state that though the amendment of section 2(d) of the Act was intended to get over certain decisions, we could not understand the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in T.C. No. 287 of 1974, which had found acceptance by the Tribunal may now be considered. That argument was that by reason of the assessee agreeing and giving the knowhow to TEMM, the sale of the raw materials, semi-finished and finished products shall be deemed to have taken place after the assessee had ceased to carry on the business of manufacture and sale and that, therefore, it would amount to a sale of sterilised assets not liable to be included in the gross turnover. Apart from the non-acceptability of this proposition, we find factually there is no basis for such an argument. The knowhow agreement provided only for a right to manufacture and sell the standard cells in favour of TEMM in respect of the four States. The right to manufacture and sell as such by the assessee was not given up under the agreement. If she had chosen, she could have carried on the business and sale of standard cells in the areas other than the four States in respect of which the right was conferred on TEMM. It was also found as a fact that the assessee had retained some portion of the finished products for sale in North India and she had not given up that business of manufacture and sale of sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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