TMI Blog2020 (8) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same. On the contrary, the terms of the agreement clearly and explicitly bear out a deposit or borrowal of the gold jewellery between the parties - Neither any advance is taken by the depositors of gold jewellery, nor any price, as such, is shown to have been paid by the assessee to such depositors or relatives of such gold jewellery. Therefore, the elements of transfer of property and passing on of the consideration for the same are completely absent in the present case. Therefore the said transaction cannot amount to a sale or purchase of gold jewellery of such relatives of the assessee to him. The provisions of Section 7A of the Act, are not at all attracted in the present case. The learned tribunal with respects, seems to have hurried in arriving at a conclusion of purchase in the present case, but, no such case of actual user of goods or no such user of the gold jewellery by the dealer, has even been noted in the present case during the year in question. Petition allowed. - W. P. NO. 15703 OF 2007 - - - Dated:- 13-3-2020 - THE HONOURABLE MR. JUSTICE DR. VINEET KOTHARI And THE HONOURABLE MR. JUSTICE R. SURESH KUMAR For the Petitioner : Mrs. C. Rekha Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght into the account of the proprietory business has to be treated as purchase of the proprietory concern since the proprietor and the individual is one and the same and the gold used in manufacture and sales of gold ornaments is liable to tax under section 7a of the TNGST Act 1959. The above clarification is subsequent to the one issued in special Commissioner and Commissioner of Comml. Taxes letter K.Dis.Act cell I/90517/97 dated 12.11.97 to the effect that if the proprietor brings gold into the business as Capital contribution . It will be included in the purchase turnover liable to be taxed under sect.7A of the Act.' 4.The first appeal filed by the assessee came to be allowed by the Appellate Assistant Commissioner, vide his order dated 16.08.2000, holding that there was no purchase of gold jewellery by the assessee, but only a deposit or loan of such jewellery taken by him from the relatives and it did not attract the levy of purchase tax under section 7A of the Act. 5.The said appellate authority quoted the terms of Memorandum of Understanding between these parties which were reduced in writing also. The said relevant portion of the order passed by the learned Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory rights over the same. The ownership shall vest with the depositor always. VIII) In no case if any dispute touching this memorandum the same shall be referred to the arbitrator, one to be appointed by each partner and their umpire pursuant to the arbitrate by law in force at the relevant point of time. 6. In the above said agreement, the learned Assessing Officer has noticed that there is no time limit for returning the pure gold or gold jewellery to the depositor by the borrower i.e., proprietor of the concern and as per the conditions laid down in the agreement in para (1). It is inferrred that the borrower is free to melt the ornaments and used them as they deem fit. In this case on hand, the conditions laid down in the agreement in para No.(1) was made to propose the value of the borrowed jewellery for the purpose of making assessment. Whereas the appellants in the grounds of appeal have contended that the question of purchase will arise only if there is a buyer and a seller, there is a consideration and there is a transfer of property in the goods from the seller to the buyer; that unless all the above ingredients are satisfied, there cannot be any sale or purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19017/97 dated 12.11.97 in which the Commissioner of Commercial Taxes had clarified that if the proprietor bought gold into the business as capital contribution a would be mcladed in the purchase turnover for the purchase turnover liable to be taxed under section 7A of the Act and the total turnover for the purpose of assessment under section 3E of the Act. The learned Additional State Representative besides recoating the grounds of appeal pleaded for sustaining the order of the assessing officer. 5. On the other hand the learned Advocate appeared for the respondent dealer filed written submission and argued that pure gold and old gold jewellery deposited by the members of the family as well as the proprietor himself in the business was only a deposit and liable to be returned to the depositors at any time as requested by the depositors and there was no transfer of property from the members to the business or by the proprietor himself to the business and also filed copies of return for the purpose of payment of wealth Tax by the depositors and claimed that pure gold and old gold jewellery deposited in the business had always been the deposit and that there was no sale at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by using the same in the manufacture of jewellery or disposing of the same by wah of sale etc. The borrower/dealer has been permitted to melt the gold jewels and use as he likes. When this is one of the condition incorporated with the agreement the appellant cannot claim that the gold and gold jewellery under dispute is onlya deposit. Whenever the family members who have deposited the gold or gold jewellery ask for the return of gold he cannot return the gold or gold jewellery as such as received from the family members. But he can return the exact quantum of gold or gold jewellery as received. Till such time the Dealer has paid interest in the form of compensation at the rate of 5% per year on the value of the goods so borrowed. This is applicable onlyt to the gold or gold jewellery borrowed from his family members. Thus the transaction at the time of borrowing the gold and at the time of returning the gold is nothing but a transaction i.e. Purchase and sales for consideration. Therefore the assessing officer is correct in having brought the above turnover for liability under section 7A and for inclusion in the total turnover for the purpose of assessment under section 3E. So als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t petition filed by the assessee dealer deserves to be allowed and the order of the learned assessing authority as well as the tribunal uphelding the levy of purchase tax under section 7-A of the Act is liable to be set aside. 11.The provisions of 7-A of the TNGST Act are quoted below for ready reference. '7-A. Levy of Purchase Tax. - (1) Subject to the provisions of sub-section (1) of Section 3, every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods (the sale or purchase or which is liable to tax under this Act) in circumstances in which no tax is payable under Section 3 or 4 as the case may be, (not being a circumstance in which goods liable to tax under sub- section (2) [(2-A) or (2-C)] of Section 3 or Section 4, were purchased at a point other than the taxable point specified in the First [the Fifth, the Eleventh] or the Second Schedule) (respectively) and either,- (a) consumes or uses such goods in or for the manufacture of other goods for sale or otherwise; or (b) disposes of such goods in any manner other than by way of sale in the State; or (c) despatches or carries them to a place o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the said gold jewellery and the payment of 5% compensation every year, is nothing but a substitute of interest or compensation for fluctuations in price, if any. Neither any advance is taken by the depositors of gold jewellery, nor any price, as such, is shown to have been paid by the assessee to such depositors or relatives of such gold jewellery. Therefore, in our opinion, the elements of transfer of property and passing on of the consideration for the same are completely absent in the present case. Therefore the said transaction cannot amount to a sale or purchase of gold jewellery of such relatives of the assessee to him. 13. Therefore, in our considered opinion, the provisions of Section 7A of the Act, are not at all attracted in the present case. The learned tribunal with respects, seems to have hurried in arriving at a conclusion of purchase in the present case, but, no such case of actual user of goods or no such user of the gold jewellery by the dealer, has even been noted in the present case during the year in question. Therefore, the present writ petition is allowed and the impugned order passed by the learned tribunal as well as the learned assessing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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