TMI Blog1995 (10) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... tings 16,114.26 Laboratory equipment 13,929.72 Furniture 5,439.75 Office equipment 1,837.62 Motor car 11,104.00 Stock of stores 35,464.36 9,59,455.28 The Commercial Tax Officer brought to tax, the said amount of Rs. 9,59,455.28 rejecting the objection of the appellant that the above items were sold after the closure of the unit and the said sale could not be treated as "sale". On appeal, the Deputy Commissioner of Commercial Taxes, Kakinada, accepting the contention of the appellant, held that the transfer of plant and machinery, finished goods, etc., to the new company did not amount to sale and the entire turnover of Rs. 9,59,455.28 was, therefore, excluded from tax. The respondent, in the exercise of the revisional powers conferred on him under section 20 of the Andhra Pradesh General Sales Tax Act, 1957 (for short, "the Act"), by an order dated December 4, 1987, set aside the order of the appellate authority and restored the order of the Commercial Tax Officer holding that the word "business" has a wide meaning under the Act and any transaction incidental to it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to make gain or profit and whether or not any gain, or profit accrues therefrom; and (ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern." The word "turnover " as defined in clause (s) means, among others, "the total amount set out in the bill of sale". Under section 5 of the Act tax is leviable on the turnover of sales or purchases of goods. The levy is, therefore, on the sale of goods, i.e., on the transfer of property in goods by one person to another "in the course of trade or business". The definition of "business" as amended by Act 7 of 1966, is an inclusive definition. It means trade, commerce or manufacture or adventure or concern in the nature of trade, commerce or manufacture. It also includes any transaction in connection with or incidental to such trade, commerce, manufacture or adventure or concern. The meaning given to the expression "turnover" is comprehensive enough to include any commercial activity which is directly or in any way connected with the business of the dealer. The term "business" as amended, has come up for consideration before the Supreme Court in State of Tamil Nadu v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led drums, hose pipes, etc., were all held to be connected with the business of the company. This finding is a finding of fact but even otherwise the very nature of the particular scrap prima facie would indicate that they are connected with the business of the company. The assessee being an oil company has to use oil drums, hose pipes, jerry cans, etc., as part of its trading activity and any sale of these unserviceable goods as scrap is a transaction connected with its trade or commerce." The decision of the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1, where the sale of stores, machinery and iron scrap, etc., was held by the Supreme Court to be not part of or incidental to the main business of selling textiles and, therefore, was not taxable, was explained and distinguished by the Supreme Court in Burmah Shell case [1973] 31 STC 426 stating: ".........In that case, as already pointed out, what was held under the analogous Bombay Sales Tax Act, which was similar to that under the Madras Sales Tax Act, prior to its amendment in 1964, the sale of scrap does not necessarily lead to an inference that business which was an element in determini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reiterated its view in considering similar provisions of the Rajasthan Sales Tax Act in District Controller of Stores v. Assistant Commercial Taxation Officer [1976] 37 STC 423. In State of Tamil Nadu v. Shakti Estates [1989] 73 STC 209 (SC); (1989) 1 SCC 636, a reserve forest was acquired with a view to raise a coffee and cardamom plantation thereon. The assessee had to cut trees to clear a portion of the forest, resulting in cutting trees. The cut trees were sold as firewood and timber. The question arose was whether the price realised by the assessee on the sale of firewood, timber, sleepers and charcoal, was assessable to sales tax. The principal contention was that they are no doubt dealers in coffee or cardamom or other crops to be grown on the estates but they are by no means dealers in firewood, timber, etc., and that their intention to acquire forest was not to deal in forest produce, whether as firewood, timber, etc., but to start a plantation. Rebutting the contentions, the Supreme Court held: ".......The facts show that each of the assessees has acquired a huge forest area which contains a large number of trees. When the assessee purchased the forest or got it on le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, or part of its integral whole or being in contemplation of the assessee with or without profit-motive. When such is the concept of the term business, the point to be considered is whether its ambit should be restricted in the case of sales effected by the assessee during the closure of the business or the dissolution of the firm of the assessee or sale of the business as a whole. It becomes, now, necessary to notice the consequence of dissolution of a firm since the sale in the instant case was necessitated by the dissolution of the firm. The Indian Partnership Act, 1932, gives the meaning of dissolution of a firm and the liabilities of the firm and its partners upon the dissolution. Section 39 of the Indian Partnership Act reads: "39. Dissolution of a firm.-The dissolution of partnership between all the partners of a firm is called the 'dissolution of the firm'." Section 45 of the Partnership Act provides for the liability of the partners to third parties even after dissolution of the firm in certain circumstances, until public notice was given. Under section 46 of the Partnership Act, the partners have a right to wind up the business after dissolution. Section 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to arrive at the value of their turnover. In fact the business as such was not separately valued and sold and what we are concerned with is the turnover of the above items. There is no factual basis to assume that there was sale of business as a whole to the company. The case of the assessee was that the firm was dissolved and a private limited company was formed. The goodwill and know-how were not separately valued. It is significant that the partners of the firm became the directors of the new company and continued the business. In this background it is difficult to accept the argument that the business was sold. The argument is, therefore, misplaced. Section 15-B of the Act also makes it plain that the assessing authority shall make an assessment of the firm even after its dissolution, as if no dissolution had taken place and every partner is liable to pay the tax levied on the firm. Hence, the firm is liable, even after its dissolution, to be assessed. We now refer to the decisions cited before us: Sri Ram Sahai v. Commissioner of Sales Tax [1963] 14 STC 275 (All.), is a case where the assessee, a dealer in cloth, closed his business and sold the entire business for a lum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the facts of the instant case and will not help the appellant. In Deputy Commissioner (C.T.), Coimbatore v. K. Behanan Thomas [1977] 39 STC 325 (Mad.) the closing stock held by the assessee in the branch of Ooty was sold as a whole and the sale value of stock held was eligible for exemption. Under rule 6(d) of the Tamil Nadu General Sales Tax Rules, 1959, the amounts realised by the sale of business as a whole shall be deducted from the total turnover. The sale of business of a branch was held as sale of business "as a whole " and accordingly the turnover was held liable to be exempted. The counsel particularly relied upon the following observations of the learned Judges: ".......When a person who is carrying on business sells the entire business or a branch of the business, he sells the same as a running business or a going concern. The sale proceeds of such a transaction cannot be said to constitute turnover as defined in the Act, because the sale proceeds are not proceeds of sale of goods made in the course of business as defined in the Act. The closure of a branch by sale thereof as a running concern to another person, apart from not constituting a sale of goods, cannot als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fixed assets on the closure of his business and it cannot be said that this transaction was in the course of trade, commerce or adventure in the nature of trade and commerce and so it cannot be included in the term 'business'." The reasoning in this decision again runs contrary to the views expressed by the Supreme Court in Burmah Shell case [1973] 31 STC 426 and in State of Tamil Nadu v. Shakti Estates [1989] 73 STC 209; (1989) 1 SCC 636. The decision rested upon the decision in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 (SC), which was rendered under the unamended definition of the expression "business". This decision was explained and distinguished in Burmah Shell case [1973] 31 STC 426 (SC), which was not noticed by the learned Judges. In Commissioner of Commercial Taxes v. Krudd Industries Ltd. [1991] 83 STC 127 (WBTT) the business of the assessee was closed in 1965. For the assessment year ending with December 31, 1968, the assessee showed sales of raw materials, stores and old machinery and claimed exemption from tax on the ground that said sales were not in the course of business of the assessee. The West Bengal Taxation Tribunal upheld the object ..... X X X X Extracts X X X X X X X X Extracts X X X X
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