1962 (11) TMI 41 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of turnover for sales of materials by building contractors, applicability of sales tax on surplus materials sold, determination of dealer status for building contractors, profit motive requirement for sales tax liability.

Analysis:
The judgment by the Madras High Court involved a dispute regarding the assessment of turnover for sales of materials by building contractors. The assessees, in this case, were building contractors, and the turnover in question was related to the sales value of materials left over after completing building contracts. The Deputy Commercial Tax Officer included various assets sold by the assessees, leading to a disagreement on the tax liability. The Appellate Assistant Commissioner partially accepted the assessees' contention, deleting a portion of the turnover related to plant and machinery sales. However, other materials sold were deemed assessable to tax due to periodic sales after completing construction work. The Tribunal further differentiated certain materials, like scaffolding, and estimated their value for deletion from the turnover, resulting in a confirmed assessment.

Regarding the issue of dealer status, the assessees contended that they were not dealers in the traditional sense of buying and selling materials like broken bricks and cement. They relied on a previous decision regarding taxable turnover for construction materials. The court analyzed the definition of a "dealer" under the Act, emphasizing that carrying on the business of buying, selling, or supplying goods constituted dealer status. Despite the unique nature of building contracts, the court concluded that the assessees fell within the definition of a dealer, irrespective of the motive behind purchasing materials.

The judgment also addressed the profit motive requirement for sales tax liability. The court dismissed the argument that an independent profit motive was necessary for each transaction, highlighting that the overall business activity's profit motive sufficed. Citing precedents, the court clarified that the profit motive assessment pertained to the entire business rather than individual transactions. The court rejected the contention that the absence of a profit motive in specific sales exempted them from tax liability, emphasizing the overarching profit motive in the assessee's business activities.

In conclusion, the court dismissed the revision petition, upholding the tax liability on the turnover of surplus materials sold by the building contractors. The judgment underscored the dealer status of the assessees, the applicability of sales tax on surplus material sales, and the overarching profit motive requirement for assessing tax liability.