TMI Blog2010 (8) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and sale of biscuits and confectionery, wheat products, jams, jellies and creams. On March 29, 2001 the promoters of the assessee-company entered into heads of agreement with M/s. Britannia Industries Ltd., a public limited company, for transfer of their biscuits business comprising of manufacture, distribution and sale along with the entire market network and the related trademarks, brands, copyrights and designs with all assets and liabilities of the biscuits business. Under the terms of the agreement entered into, the promoters of the petitioner-company agreed to altogether got out of the business of biscuits by effecting a sale of the entire business as a whole and as a going concern. The entire assets and liabilities including the movables and immovables, goodwill, intellectual property, assets such as registered trademarks and brand names as well as unregistered trade marks and brand names stood transferred by virtue of sale/transfer of equity shares held by the promoters along with their family particulars in the assessee-company in favour of Britannia Industries Ltd. In terms of the aforesaid agreement M/s. Britannia Industries Ltd., acquired 49 per cent of the equit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled for by the assessing authority. The assessing authority passed an order dated July 28, 2003 again overruling the objections of the assessee and tax liability was created as was done earlier. However, penalty proceedings were dropped. Aggrieved by the said order, the assessee preferred one more Writ Petition 38975 of 2003 which came to be rejected directing the assessee to prefer a statutory appeal within a period of two weeks from the date of receipt of the order in the writ petition. Accordingly, the assessee filed an appeal before the Joint Commissioner of Commercial Taxes (Appeals), Bangalore City Division 3. The appellate authority after hearing both the sides, dismissed the appeal confirming the order passed by the assessing officer by its order dated November 27, 2003. The assessee preferred an appeal before the Karnataka Appellate Tribunal challenging the aforesaid two orders. The said appeal also came to be dismissed by an order dated October 27, 2006. In those circumstances, the assessee is before this court. 3. The learned counsel for the parties submit that the subject-matter of these revision petition is only the tax payable for the consideration received for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration, and includes- (i) the Central Government and a State Government other than the Government of Karnataka which carries on such business; (ii) a casual trader, that is to say, a person who in any year has not been regularly engaged in the business of buying, selling, supplying or distributing goods, but has in such year been occasionally engaged, whether as principal or agent, in the business of buying, selling, supplying or distributing of such goods. In order to have the correct meaning of the dealer under the Act, in defining him the words business and goods are used and those words are also defined under the Act. It is necessary to look into the meaning given under the Act to the said words. Section 2(1)(f2). '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover and turnover as defined under the Act, which reads as under: (u2). 'Total turnover' means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the Territory of India or in the course of import of the goods into the Territory of India; (v) 'Turnover' means the aggregate amount for which goods are bought or sold, or supplied or distributed or delivered or otherwise disposed of in any of the ways referred to in clause (t) by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration. 7.1. The apex court in the case of State of Gujarat v. Raipur Manufacturing Co. Ltd. reported in [1967] 19 STC 1 (SC), explaining what constitutes a turnover has held as under (pages 5-7 in 19 STC): . . . in the turnover of a person carrying on the business of selling one commodity will not be included the price received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , continuity and regularity indicating an intention to continue the activity of carrying on the transactions must exist. But no test is decisive of the intention to carry on the business: in the light of all the circumstances an inference that a person desires to carry on the business of selling goods may be raised. . . . It is clear from these cases that to attribute an intention to carry on business of selling goods it is not sufficient that the assessee was carrying on business in some commodity and he disposes of for a price articles discarded, surplus or unserviceable. . . 7.2. The Supreme Court also had an occasion to define the word business in the case of District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer reported in [1976] 37 STC 423 (SC) which held as under (page 424 in 37 STC): We think that the activity of the appellant in the selling of unserviceable material and scrap-iron, etc., would be 'business' within clause (i) the definition of the word 'business' introduced by the amending Act. The word 'business' according to clause (i) of that definition would include any trade, commerce, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act the charge of tax under the APGST Act. The crucial question then is whether these requirements are satisfied. Is there an element of business present in these disputed transactions? Assuming there was a sale of goods, did such sale take place in the course of business and by a person who carries on the business of buying and selling goods? 7.5. They have also referred to the meaning of the word business as explained in the aforesaid Raipur case [1967] 19 STC 1 (SC), as under (pages 14 and 29 in 112 STC): 24. The expression 'business' though extensively used in taxing statues, is a word of indefinite import. In taxing statutes, it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business, there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive, and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f activity or conduct set with a purpose. In taxing statutes, it is used in the sense of an whole time occupation or profession of a person which requires continuous attention and labour. To regard an activity as business, there must be a course of dealings either actually continued or contemplated. In facts and circumstances of the case as found by the assessing officer and the Additional Commissioner, there was a sale of movable assets, but it could not be said that sale was during the course of business to attract levy of tax under the Act. . . 7.7. Therefore, to attract the liability to pay tax under section 5 of the Act, a dealer must be carrying on the business of buying, selling, supplying and distributing goods. A person to be a dealer must be engaged in the business of buying or selling or supplying goods. A person is a dealer within the meaning of the Act, when he carries on the business of buying or selling of goods for consideration paid or payable in future. What is required is that sale or purchase must take place during the course of business of buying or selling in view of definition of dealer in clause (h) of section 2 of the Act. The expression business th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lary to such trade, commerce, manufacture, advertisement or concern constitutes business , but such a transaction should have a direct nexus with the main business carried on by the dealer. 7.9. In this background if we look into the facts of this case to consider whether sale of intellectual property attracts the payment of tax under the Act, the first question to be answered is, whether the assessee is carrying on business of buying, selling, supplying and distributing intellectual property. If the answer is no, then there is no tax liability. Secondly, we have to find out when the assessee is carrying on the business of sale and purchase of biscuits, confectionery, wheat products, jams, jellies and creams, whether the sale of intellectual property could be considered as a transaction which is in connection with or incidental to or ancillary to the aforesaid business. If it is incidental, ancillary or in connection with the said business even though it is not the main business, there exists a tax liability. But, if it is not incidental or connected or ancillary to that trade there is no liability to pay such tax. The assessee is the owner of this intellectual property, rights ..... X X X X Extracts X X X X X X X X Extracts X X X X
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