1962 (4) TMI 70 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 26(1) of the Bombay Sales Tax Act, 1953 regarding the liability of a transferee for unpaid dues of the transferor.

Detailed Analysis:

The case involved a reference under section 34(1) of the Bombay Sales Tax Act, 1953, regarding the liability of a partnership firm's transferee for unpaid sales tax dues. The partnership firm had transferred its goodwill and right to use certain labels to the applicant in satisfaction of a loan. The issue was whether this transfer amounted to the transfer of the entire business, making the applicant liable for the tax liability of the partnership firm.

The applicant contended that the transfer of goodwill and labels did not constitute the transfer of the entire business, hence he should not be held liable for the tax dues of the partnership firm. The Tribunal had held that the transfer of goodwill and labels equated to the transfer of the entire business, making the applicant liable for the tax liability.

The court analyzed the concept of goodwill as the advantage of reputation and connection of a business, distinct from the business itself. Similarly, the right to use trade marks does not equate to the transfer of the entire business. The court emphasized that for a transferee to be liable for the transferor's tax dues, it must be established that the entire business was transferred.

The court noted that the absence of evidence regarding the transfer of physical assets like stock-in-trade and furniture raised doubts about the completeness of the transfer of the business. The Tribunal's inference that no other assets were transferred besides goodwill and trade marks was deemed unjustified. The court highlighted that the mere transfer of goodwill and trade marks does not necessarily indicate the transfer of the entire business.

Conclusively, the court held that the transfer of goodwill and trade marks alone did not amount to the transfer of the entire business. Therefore, the applicant was not liable for the tax dues of the partnership firm. The court answered the reference in the negative, directing the respondent to pay the costs of the applicant and refund any deposits made by the applicant.

In summary, the judgment clarified the criteria for determining the transfer of an entire business and the liability of a transferee for the transferor's tax dues under the Bombay Sales Tax Act, 1953.