1980 (8) TMI 174 - SC - VAT and Sales Tax

Whether sales of provisions effected by the assessee in a workmen s store maintained by it are assessable to tax under the Tamil Nadu General Sales Tax Act, 1959? Held that - Appeal allowed. The assessee carried on business of selling provisions in the store and the sales attracted the liability to tax under the Tamil Nadu General Sales Tax Act, 1959, as it existed during the year of assessment & thus restore the order of the sales tax authorities holding that the sales in question were assessable to tax under the Tamil Nadu General Sales Tax Act, 1959.

Summary

Issues:
1. Whether sales of provisions by the assessee in a workmen's store are assessable to tax under the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:
The judgment of the Supreme Court in this case dealt with the issue of whether sales of provisions by the assessee in a workmen's store were subject to tax under the Tamil Nadu General Sales Tax Act, 1959. The assessee, a leading textile manufacturer in Tamil Nadu, operated a store on its factory premises where workmen could purchase provisions. The sales tax authorities initially brought the sales of provisions in the store under the purview of taxation. The assessee argued that the store was not operated for profit but as a facility for workmen, hence not constituting a business under section 2(d) of the Act. The Tribunal ruled in favor of the assessee, leading the State to appeal to the High Court, which upheld the decision based on a previous case. However, the Supreme Court highlighted that the earlier case had been overruled, emphasizing that the term "business" under the Act included transactions incidental to trade or commerce, irrespective of profit motive.

The Supreme Court further elaborated on the definition of "business" under the Act, emphasizing that for a transaction to fall under clause (ii) of section 2(d), it need not exhibit typical business characteristics but must be connected to or incidental to the primary business activity. In this case, the sale of provisions to workmen was deemed incidental to the textile manufacturing business of the assessee. The Court referenced a previous case to support this interpretation, where a canteen at a cinema was considered incidental to the cinema business. Applying a similar rationale, the Court concluded that the provision of provisions to workmen was indeed incidental to the textile manufacturing business, thus falling within the definition of "business" under the Act.

In conclusion, the Supreme Court held that the assessee's sales of provisions in the workmen's store constituted a business activity under the Tamil Nadu General Sales Tax Act, 1959. Therefore, the sales were deemed assessable to tax as per the provisions of the Act. The Court allowed the appeal, overturning the decisions of the High Court and Tribunal, and directed the assessee to bear the costs of the appeal to the State.