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TMI Blog1996 (6) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... nter alia, took into account certain transactions between EGL and its sister concern M/s. Eicher Tractors Ltd. ("ETL", for short). During the relevant period EGL transferred Rs. 8,40,939 and Rs. 25,000 worth of goods to ETL against declarations in the requisite forms and collected and deposited tax at the applicable rates on these transactions. A sale to ETL of Rs. 4,03,000 for resale within the State was also disclosed. In addition EGL transferred to ETL in the relevant period Rs. 16,45,497 worth of tractor spares on which no tax was paid on the grounds that it was covered by section 9(2) of the RST Act; and an agreement between EGL and ETL was produced in support of the contention that it was a transfer of ownership of part of EGL's business to ETL within the meaning of section 9(2) of the RST Act. The CTO rejected this contention holding that there was no sale of the business and ownership ("milkiyat") had not been transferred and proceeded to assess the transaction in tractor spares worth Rs. 16,45,497 to tax at 4 per cent. He also assessed EGL to pay sundry amounts on account of interest and penalty. 3.. Aggrieved by this EGL went in appeal to the Deputy Commissioner, Commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, as if the goods have been sold by him, unless the transferee holds a certificate of registration or obtains it within the prescribed period..............." 9.. It would be obvious that transfer of ownership of part of the business is the basic prerequisite to attract the provisions of sub-section (2) of section 9 of the RST Act, i.e., if ownership of part of the business has not been transferred EGL would continue to be liable to pay tax on the stock of goods transferred to ETL even if the latter held or obtained a certificate of registration within the prescribed period. 10.. Admittedly, the business of manufacture of tractor/components was part of the business of EGL. Admittedly too, under the agreement between EGL and ETL the latter was entrusted with the business of manufacture of tractor / components as witnessed by the agreement between the two. Admittedly, also ETL held a certificate for registration. 11.. Therefore, if the agreement witnessed the transfer of ownership of the business of manufacture of tractor/components from EGL to ETL then EGL would not be liable to pay tax on Rs. 16,45,497 worth of tractor spares transferred to ETL. As EGL has not challenged the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are rights in rem". A normal case of ownership according to "Salmond on Jurisprudence " exhibits the following incidents: (a) Owner has the right to possess. If he is not in possession he retains a reversionary interest. (b) Owner has the right to use and enjoy the thing owned: the right to manage it, i.e., the right to decide how it shall be used and the right to the income from it. Salmond clarifies that unlike the right to possess which was a right in the strict sense these were in fact liberties. (c) Owner has the right to consume, destroy or alienate the thing. (d) Ownership is indeterminate in duration. (e) Ownership has a residuary character. 15. By this reckoning, EGL continues to retain ownership. EGL retains a reversionary interest. ETL has not been conferred with the right to consume, destroy or alienate the business. ETL's interests in the business is not indeterminate in duration. To the extent that the arrangement envisages ETL running, operating and working the factory only the residual rights including the right to possess have been retained by EGL. All these are clear from a bare reading of the clauses of the agreement quoted by the Board. 16.. That Salm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, even though taken singly each is a necessary but not by itself a sufficient condition. 18.. The question of what are the ingredients of transfer of ownership of business in the context of sales tax law has also come up for interpretation before High Courts albeit in the context of the transfer of entire businesses. The relevant provision in sub-section (1) of section 9 of the RST Act for transfer of entire business. The distinction between sub-section (1) and sub-section (2) of section 9 of the RST Act is not based on any different concept of ownership. Section 9(2) of the RST Act stands in contradistinction to section 9(1) of the same Act only on whether the liability to pay tax is that of the transferor or that of the transferee. In the case of transfer of entire business the liability to tax under the RST Act fastens on the transferee invariably whereas in the case of transfer of part of the business it fastens on the transferee only if the transferee holds a certificate of registration or obtains it in the prescribed period, otherwise it fastens on the transferor. For the rest, the concept of ownership and its transfer remain the same. 19.. Sub-section (1) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is carried on......The transfer of a business implies the transfer of a running business together with all its rights, liabilities, stock-in-trade and goodwill........" (Para 6 of the judgment at pages 354 and 355 of the report). 22.. The RST Act has its own definition of "business". Sub-section (cc) of section 2 of the RST Act defines "business" to include manufacture and not just trade and reads: "2(cc) 'business' includes- (i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and (ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern; but does not include activities of sale, supply or distribution of goods carried on without any profit motive by- (i) any charitable or religious institution in the performance of its functions for achieving its avowed objects; and (ii) an educational institution, where such sale, supply or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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