2014 (7) TMI 1092 - HC - VAT and Sales Tax

Levy of tax on the sale of used Car under Karnataka Value Added Tax - Held that - Assessee is a dealer in wood and wood products. He is not selling cars occasionally every year. The car which he has sold is a solitary transaction. It is nothing to do with the business which is being carried on by him. It is not sale of business nature. There is no profit motivein the sale of the said car. Under those circumstances the Tribunal was justified in setting aside the order passed by the Authorities holding the sale of a car as a solitary transaction would not make him a dealer or a casual dealer under the Act. Therefore we do not see any merits in this petition. - Decided against Revenue.

Summary

Issues involved:
1. Whether the sale of a used car by the assessee constitutes a one-time transaction or regular business for tax liability under the Karnataka Value Added Tax Act.
2. Whether the assessee qualifies as a casual trader under the Act for tax liability.

Issue 1: The High Court addressed the issue of tax liability on the sale of a used car by the assessee, a partnership concern dealing in timber. The Assessing Officer taxed the sale under Section 4(1)(b) at 12.5%, citing the motor vehicle as input tax restricted goods. The Appellate Authority upheld this decision, but the Karnataka Appellate Tribunal reversed it. The Tribunal emphasized that for tax liability to apply under the Act, there must be volume, frequency, continuity, and regularity in transactions, along with a profit motive. As the sale of the car was a one-time transaction unrelated to the assessee's timber business, the Tribunal ruled that no tax was payable, setting aside the previous orders and allowing the appeal.

Issue 2: The learned Government Advocate argued that even if the assessee did not meet the definition of a "dealer," they still qualified as a casual trader under the Act, thus attracting tax liability. Citing a judgment, the Advocate contended that occasional transactions of a business nature could make one a casual dealer, irrespective of regular business activities. Conversely, the assessee's counsel maintained that the sale of the car was a solitary transaction, not aligning with the definition of a casual dealer. The High Court referred to a Supreme Court judgment regarding the meaning of a casual dealer, emphasizing occasional transactions involving goods of a business nature. The Court distinguished between occasional sales and regular business activities, concluding that the sale of the car did not make the assessee a dealer or casual trader under the Act. Therefore, the Tribunal's decision to set aside the tax liability was upheld, and the revision petition was dismissed.