TMI Blog2013 (12) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be in business and retained business in those units, the question of exclusion of turnover relating to stock in trade does not arise. The bifurcation of the price would not in any manner go against the intention of the parties viz., sale of entire unit at Thoraipakkam and Ranipet in favour of the purchaser and going by the various terms of the agreement - there was no justifiable ground to accept that the sale consideration would form part of the turnover – Following Deputy Commissioner (C.T)., Coimbatore Vs. K.Behanan Thomas [1976 (4) TMI 202 - MADRAS HIGH COURT] - when there is transfer of business as a whole even if it be an unit, were two independent units, Explanation 3 to Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959 cannot be attracted to the assessee - The demand as well as the penalty levied on the assessee set aside – Decided in favour of Assessee. - Tax Case (Revision) No.49 of 2013 - - - Dated:- 6-11-2013 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Petitioner : Mr. N. Prasad for Mr. N. Inbarajan For the Respondent : Mr. A. R. Jayapratap Govt. Advocate(Taxes) ORDER (The Order of the Court was made by Chitra Venkataraman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assets as on the effective date of transfer -31.01.1994. The agreement contemplated the transfer of business in the manufacture of Agro-engines, Gen set at Thoraipakkam along with land and building and the business in Light Engineering components unit located at Ranipet Unit. In the revised return filed on 20.05.1994, the assessee claimed exemption on the consideration received viz., on a sum of Rs.44,67,88,548/-. In the transfer of three lines of business, the assessee had stated that it had transferred lock, stock and barrel of the trade and the consideration included non-compete fee in the said consideration to M/s.Greaves Ltd., and the assessee retained the business in two-wheeler in Thiruvotriyur alone. 4. The agreement entered into between the parties dated 15.12.1993 clearly referred to the sale of immovable assets including tangible and intangible assets transferred including Technical Assistance Agreement etc. The assessee claimed that in view of the agreement thus entered into for sale of the above units viz., units at Thoraipakkam and Ranipet in toto and considering the non-compete clause therein, not to enter into the business, the assessee claimed in its return t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the effective date of transfer was 31.12.1993. Considering the work thus already in progress, the agreement contemplated the elevation of the price, which, however did not happen at all. Thus, the assessee submitted that Clause 2(b) indicated what would be taken over was the Undertaking as a whole on the effective date and there was no separate contract relating to immovable properties and movable assets. In the circumstances, the assessee pointed out that Clause 2(b) of the agreement was inserted only for the protection of the vendor and cannot be considered to be of any sale of movable assets. 8. The assessee further pointed out that Clause-4 (a)(ii) referred to independent sale of certain assets and the assessee submitted that the the said clause would not relate to the business being sold. The purchaser was given an option to buy these assets for which valuation mechanism was also agreed upon and further that purchaser never opted for purchase of these assets; thus, the question of taking Clause 4(a)(ii) of the agreement as adverse to the claim of the assessee did not arise. 9. The assessee further pointed out that Clause-19 of the agreement contemplated the manner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had not agreed to piecemeal sale of business, on the mere fact that the purchaser had given the value of the immovable assets and movable assets separately by itself would not defeat the claim of the assessee for exemption from taxation. 14. We agree with the above submission of learned counsel appearing for the assessee. At the outset, the view of the Sales Tax Appellate Tribunal based on the decision reported in 7 STC 740 in the case of Tools and Machineries Ltd., Vs. State of Madras, clearly shows the incorrect approach to the case on hand which is distinguishable from the reported decision. A reading of the decision reported in 7 STC 740 (cited supra) shows that what was contemplated in the decision reported in 7 STC 740 in the case of Tools and Machineries Ltd., Vs. State of Madras was sale of entire stock in trade and the assessee continued to be in business and retained certain assets of the business. In that context the decision was made holding that the sale of stock could not be taken as the sale of the entire business. On the facts, thus, projected, this Court pointed out that the sale of the entire stock-in-trade as such could not be treated as sale of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as incidental or ancillary to the carrying on business did not arise. This Court pointed out that a person may carry on several lines of business and each line of business would be a unit of business by itself; if there is a sale of that unit of the business as a whole, then the assessee would not be liable to be taxed either on the general principle that there is no sale in the course of business, since closure of a line of business could not be incidental or ancillary to its carrying on or on the alternative basis of application of Rule 6(d) of Tamil Nadu General Sales Tax Rules, 1959. Thus, on facts once again, this Court held that the assessee was eligible for exemption in respect of the turnover. 17. In the decision reported in 112 STC 01 in the case of Coromandal Fertilisers Limits Vs. State of A.P., the Full Bench of the Andhra Pradesh High Court considered a similar question and once again reiterated the law laid down by this Court in the decision reported in 39 STC 325 in the case of Deputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas. The case dealt with by the Andhra Pradesh High Court was similar to the case on hand. The Full Bench of the Andhra Prad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets, available patents, available collaboration agreements, dealership network, dealer and vendor contracts etc., including Research and Development and other intangibles accrued to the products would stand transferred to the purchaser. 20. Clause 3 of the agreement specifies what was excluded under the sale agreement. The effective date of transfer was stated 31st December 1993. A reading of the Clauses in the agreement show except as provided in Clause 12, the use of the name viz., "Enfield" would remain with the assessee i.e., the manufacturer of two-wheeler. 21. Clause 3 of the agreement referred the Mode of Payment and Clause 6 gave the details of Technical Licence Agreement entered into between the assessee and the purchaser. In the light of the terms of the agreement, it is evident that what was contemplated under the agreement referred to above was the transfer of business as a whole in respect of Thoraipakkam Unit and the Ranipet Unit as a going concern from February 1994 to M/s.Greaves Private Limited, Bombay. Since the transfer of these units included every asset and liability, all employees, pending contracts, licences, plant Machinery, furniture, fixtures etc., a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
