1988 (6) TMI 320 - HC - VAT and Sales Tax

Summary

Issues:
- Tax liability on turnover from sale of back number copies of newspapers
- Exemption from tax as a non-dealer with non-taxable main business

Analysis:
The judgment of the High Court of Andhra Pradesh dealt with the tax liability of an assessee on the turnover from the sale of back number copies of newspapers that remained unsold. The assessee, a printing and publishing company, sold these unsold newspapers as waste paper, which was brought to tax by the assessing authority under the Andhra Pradesh General Sales Tax Act, 1957. The main contentions raised were whether the unsold newspapers could be considered exempt from tax as newspapers and whether the assessee, not being a dealer with a non-taxable main business, was liable for tax on this turnover.

The Court referred to a Supreme Court decision regarding the sale of unsold newspapers as waste paper, stating that such transactions cannot be regarded as the sale of newspapers. However, the Court emphasized that even if the unsold newspapers were not exempt from tax, the turnover could still be taxed if it was part of the regular business activity pursued with a profit-making motive. The Court noted that the sale of surplus unsold newspapers was incidental to the main business of printing and publishing newspapers, making it taxable.

The assessee argued that since it was not registered as a dealer and its main business of selling newspapers was not taxable, the incidental activity of selling surplus newspapers should also be exempt from tax. The Court distinguished this case from previous decisions involving different entities and activities, stating that the assessee's main business was indeed a taxable business as defined by the Act. The Court held that since the sale of surplus newspapers was merely incidental to the main business, it was taxable, regardless of the assessee's dealer registration status.

Moreover, the Court rejected the application of principles from other decisions where the main activity was not considered a business, emphasizing that in this case, the main activity of the assessee was a business, albeit not taxable under the Act. Therefore, the Court dismissed the tax revision cases, ruling that the sale of surplus unsold newspapers was taxable due to its incidental nature to the main business of printing and publishing newspapers.