1984 (4) TMI 265 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of taxable turnover of M/s. Cheran Transport Corporation Limited for the years 1972-73 and 1973-74, Contention of the assessee regarding being a dealer and tax liability on sales of scrap items, Interpretation of the definition of "business" under the Tamil Nadu General Sales Tax Act, Application of precedents including judgments of the Supreme Court and High Courts, Tax liability on the value of machineries transferred to another corporation.

Analysis:

The High Court of Madras addressed the assessment of taxable turnover of M/s. Cheran Transport Corporation Limited for the years 1972-73 and 1973-74. The assessee contended that it is not a dealer and thus not liable for tax on sales of scrap items. The Tribunal, relying on the decision of the Andhra Pradesh High Court, held that the assessee is not liable for tax on the sales of scrap items. However, the State challenged this decision, arguing that the sales of scrap items should be taxed based on the Supreme Court's interpretation of the definition of "business" in the Tamil Nadu General Sales Tax Act.

The Supreme Court's rulings in various cases, including Burmah Shell's case, emphasized that any transaction incidental or ancillary to the trade or commerce, even without a profit motive, is liable to be taxed. The Court highlighted that the definition of "business" includes activities like selling provisions to employees, as seen in State of Tamil Nadu v. Binny Ltd. The Andhra Pradesh High Court and the Madras High Court have previously held that entities like the Andhra Pradesh State Road Transport Corporation and the Port Trust of Madras are not liable for tax on sales of scrap items due to their primary functions not being commercial in nature.

The High Court of Madras, following the Supreme Court's decision in District Controller of Stores v. Assistant Commercial Taxation Officer, concluded that M/s. Cheran Transport Corporation Limited qualifies as a dealer under the Act, making its sales of scrap items taxable. The Court rejected the contention that the transfer of machinery to another corporation, due to the closure of a workshop, should not be taxed, citing the principle that the closure of a line of business is not incidental to its operations.

In conclusion, the High Court partly allowed the tax cases, holding that M/s. Cheran Transport Corporation Limited is liable for tax on the sales of scrap items but not on the value of machineries transferred to another corporation. No costs were awarded in this judgment.