1976 (4) TMI 202 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the assessing authority's revision of the assessment.
2. Eligibility for exemption under rule 6(d) of the Tamil Nadu General Sales Tax Rules.
3. Interpretation of "business as a whole" and its implications for tax exemption.
4. Applicability of the Tamil Nadu General Sales Tax Act definitions to the case.

Summary:

1. Legality of the assessing authority's revision of the assessment:
The Deputy Commercial Tax Officer revised the assessment, adding Rs. 18,929.71 to the turnover, which was initially exempted. The court found this revision illegal as the assessing authority did not specify the provision under which the revision was made. The court noted that such a revision could have been done u/s 32 by the Deputy Commissioner or u/s 55 for an error apparent from the record, neither of which was applicable here. The assessing authority also did not act u/s 16 for escaped turnover. Thus, the order revising the earlier assessment was deemed illegal.

2. Eligibility for exemption under rule 6(d) of the Tamil Nadu General Sales Tax Rules:
The Sales Tax Appellate Tribunal exempted the turnover, finding that the entire business, including furniture, fittings, and stock-in-trade of the Ooty branch, had been transferred. The court upheld this finding, stating that the term "business" should be understood in a commercial sense. The Ooty branch was recognized as an independent unit, and its sale constituted the sale of "his business as a whole" under rule 6(d). Therefore, the sale value of the closing stock was eligible for exemption.

3. Interpretation of "business as a whole" and its implications for tax exemption:
The court clarified that "his business" in rule 6(d) does not mean the assessee must go out of business altogether. The sale of a branch as an independent unit qualifies as selling the business as a whole. The court also noted that the absence of goodwill in the sale does not affect the exemption, provided the transaction is bona fide and the business is sold as a going concern.

4. Applicability of the Tamil Nadu General Sales Tax Act definitions to the case:
The court examined the definitions of "business," "sale," and "turnover" u/s 2 of the Act. It concluded that the sale of a running business or a branch as a going concern does not constitute turnover as defined in the Act. Such a sale is not made in the course of business and is not incidental or ancillary to the business. Therefore, the sale proceeds are outside the scope of the Act, and the question of deduction or exemption does not arise.

Conclusion:
The tax revision case was dismissed, affirming the Tribunal's order exempting the turnover. The court held that the sale of the Ooty branch constituted the sale of the business as a whole, qualifying for exemption under rule 6(d). The assessing authority's revision of the assessment was deemed illegal, and the sale proceeds were found to be outside the scope of the Act.