1977 (1) TMI 143 - HC - VAT and Sales Tax

Summary

Issues involved:
The issue in this case is whether the purchase of cotton by the respondent institution for research purposes, and the subsequent sale of cotton yarn and cotton waste resulting from the research, would be considered as sales liable to tax under the Tamil Nadu General Sales Tax Act, 1959.

Judgment Details:

The respondent institution, supported by the Council of Scientific and Industrial Research of the Government of India, purchased cotton for its research activities in the textile industry. The yarn produced in the research process was disposed of after testing, and the respondent also provided assistance to member-mills in improving productivity and quality. The Tribunal concluded that the respondent was not engaged in business activities, therefore the purchase and sale of cotton products were not taxable under the Act.

The learned Additional Government Pleader emphasized the definition of "business" under section 2(d) of the Act, which includes trade, commerce, manufacture, or any similar activities. However, when an organization is established solely for research purposes, the purchase and sale of products for research do not fall under the definition of business. The Court found no error in the Tribunal's decision and dismissed the petitions with costs.

In conclusion, the Court upheld the Tribunal's decision that the respondent institution, primarily engaged in research, was not conducting business activities as defined under the Act. Therefore, the purchase of cotton for research purposes and the subsequent sale of cotton yarn and waste were not subject to sales tax.