1995 (1) TMI 318 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the petitioner bank can be considered a "dealer" under the Karnataka Sales Tax Act.
2. Interpretation of section 8 of the Banking Companies Regulation Act, 1949 in relation to trading activities of the petitioner bank.

Analysis:
1. The petitioner, a nationalized bank, sold goods hypothecated by a defaulting borrowing company. The Commercial Tax Officer issued notices to determine sales tax liability before delivery to purchasers. The petitioner challenged this, arguing it is not a "dealer" under the Karnataka Sales Tax Act. The court referred to past judgments where insurance companies and pawnbrokers were deemed dealers due to incidental sales activities. The court held that any transaction ancillary to trade constitutes business, thus the petitioner's sale activity falls within the definition of a dealer. Therefore, the court dismissed the petition, finding no error in the notices.

2. The petitioner contended that section 8 of the Banking Companies Regulation Act, 1949 prohibits trading activities by banking companies. However, the provision allows trading activities connected to the realization of securities held by the bank. As the petitioner's sale was for realizing securities, it fell outside the prohibition of section 8. The court compared the petitioner's case to that of insurance companies and pawnbrokers, where similar trading activities were considered as falling within the definition of a dealer. Consequently, the court dismissed the writ petition, finding no legal error or jurisdictional issue in the impugned notices.