1983 (7) TMI 285 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the sum realized by the assessee from the sale of a car is exigible to tax under the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:
The case involved dealers in electrical conductors who sold a car during the assessment year 1974-75 and realized a sum of Rs. 23,048. The assessing authority included this amount in the sales turnover for tax purposes. The appellate authority reduced the turnover to Rs. 14,500 after considering depreciation and loss. The assessee contended before the Tribunal that the Rs. 14,500 represented the sale proceeds of a capital asset and should not be considered as turnover under the Sales Tax Act. The Tribunal, relying on a Supreme Court decision, held that the sale proceeds of the car were not liable to be taxed, as the important element of frequency of sales was lacking, similar to the case of sales of forest produce by the Government of Andhra Pradesh.

The main issue before the High Court was to determine whether the sum of Rs. 14,500 realized from the car sale was subject to tax under the Tamil Nadu General Sales Tax Act, 1959. The Tribunal had ruled that the amount was not taxable based on a Supreme Court decision regarding the sales tax liability of certain transactions. However, the High Court found that the Tribunal's decision was contrary to the principle established in the Supreme Court case of State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Company. In the Burmah Shell case, the Supreme Court had held that even receipts from the sale of unserviceable items in the course of business were liable to tax under the Sales Tax Act. The High Court noted that the definition of "business" under the Act was broad enough to encompass all sales transactions conducted in the course of business, regardless of the nature of the items sold.

The High Court further referenced several cases where the principle from the Burmah Shell case was upheld, emphasizing that the sales transactions, even if incidental to the main business, were still subject to tax. The Court highlighted a recent Supreme Court decision reaffirming the applicability of the Burmah Shell case to transactions related to the business activities. Ultimately, the High Court concluded that the Tribunal had erred in not considering the precedent set by the Burmah Shell case and, therefore, allowed the tax case, setting aside the Tribunal's order and reinstating that of the appellate authority. No costs were awarded in the judgment.