1987 (12) TMI 310 - SC - VAT and Sales Tax

Whether the transaction constitutes sale of goods for giving rise to tax liability under the Act? Whether sale of the incomplete film was goods, as contemplated under the Act? Held that - Appeal dismissed. The assessee s business does not appear to be film production. At least that is not the business for which he has been registered as a dealer. The definition of business during the year of assessment was not of the extended type. There is no finding that the sale was for in course of business with profit-motive. On the other hand, the agreement of sale which is on record shows the adverse circumstances in which respondent was obliged to part with the incomplete film. In such circumstances, it is difficult to hold that the sale of the film was a part of the business of the respondent and the sale in respect of this solitary transaction would be exigible to tax.

Summary

Issues:
1. Whether the transaction involving the sale of an incomplete film constitutes a sale of goods under the Madras General Sales Tax Act.
2. Whether the value of settings and costumes in the transaction is liable to tax as the sale of tangible articles.
3. Whether the provisions of the Copyright Act are relevant in determining the tax liability under the Madras General Sales Tax Act.
4. Whether the sale of the incomplete film can be considered part of the respondent's business for tax purposes.

Analysis:
1. The main issue in this case was whether the transaction involving the sale of an incomplete film constitutes a sale of goods under the Madras General Sales Tax Act. The Tribunal and the High Court held that the transaction did not amount to a sale of goods. However, the Supreme Court disagreed, stating that an incomplete film falls within the definition of "goods" under the Act. The Court emphasized that the Copyright Act provisions are not relevant in determining tax liability, and the sale of the incomplete film should be considered a sale of goods for tax purposes.

2. Another issue raised was whether the value of settings and costumes in the transaction is liable to tax as the sale of tangible articles. The High Court held that these items were taxable, but the Supreme Court did not delve into this aspect further in its judgment. Therefore, the tax liability on the settings and costumes remains upheld based on the High Court's decision.

3. The relevance of the provisions of the Copyright Act in determining tax liability was also discussed. The Supreme Court clarified that the Copyright Act provisions are not pertinent in deciding whether a transaction constitutes a sale of goods under the Madras General Sales Tax Act. The focus should be on the definition of "goods" as per the Act rather than copyright considerations.

4. Lastly, the Court addressed whether the sale of the incomplete film could be considered part of the respondent's business for tax purposes. The Court noted discrepancies in the assessing officer's characterization of the respondent's business as film production and highlighted that the sale of the incomplete film was a solitary transaction under adverse circumstances. The Court concluded that this sale may not be considered part of the respondent's regular business activities, potentially exempting it from tax liability.

In conclusion, the Supreme Court dismissed the appeal, disagreeing with the High Court's reasoning on the sale of the incomplete film as not constituting a sale of goods. The Court directed the parties to bear their respective costs, highlighting the importance of interpreting tax liability based on the specific legal definitions and circumstances of each case.