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TMI Blog2010 (8) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 equity in the assessee and its associate companies M/s. J.B. Mangharam Foods Pvt. Ltd., acquired 26 per cent of the equity and M/s. Manna Foods Pvt. Ltd., acquired 25 per cent of the equity. M/s. Britannia Industries Ltd., acquired the trade mark of "Kwality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the sale of intellectual property only. In other words, the intellectual property owned by the assessee has been sold for a sum of Rs. 30 crore, a sum of Rs. 3 crore at 10 per cent is claimed as sales tax. The question is whether the assessee is liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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, adventure or concern; and (ii) any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern; . . . Section 2(1)(m). 'Goods' means all kinds of movable property (other than newspapers, actionable claims, stocks and shares an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 by him by sale of another commodity unless he carries on the business of selling that other commodity. That is so because within the meaning of section 2(6) of the Bombay Act 3 of 1953 to be a dealer a person must carry on the business of selling those goods, price whereof is sought to be included in the turnover. In other wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not it is carried on with a motive to make gain or profit. So even if it be assumed that the activity involved in selling unserviceable material and scrap iron, etc., would not amount to carrying on business in the normal connotation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 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 transactions must ordinarily be entered into with a profit-motive. By the use of the expression 'profit-motive' it is not intended that profit must in fact be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which pervades the whole series of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing 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" though extensively used in taxing statutes, 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 contempl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion 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, trade marks, designs and copy rights. In order to sell their goods, they use this intellectual property. Therefore, this trade mark or design cannot be sold in the course of business. Admittedly, the assessee is not in the business of selling and buying this intellectual property rights. These intellectual property rights are acquired by the assessee over a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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