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2014 (10) TMI 908 - HC - VAT and Sales TaxClaim of exemption - Sale of business as a whole - Explanation III to sub section 41 of Section 2 of the TNVAT Act 2006 states that any amount realized by a dealer by way of sale of his business as a whole shall not be included in the turnover. In the impugned order the Assessing Officer held that the condition stipulated under Section 2(41) of the Act excluding the turn over from the tax liability is that the amount should have been realized by the dealer by way of sale of his business as a whole and that the petitioner/ assessee have sold only a division of their business (Windmill division) and when they have not sold their business as a whole the receipt on account of the sale of one of the division of their business cannot be excluded from tax liability. Held that - Similar issue was decided in the case of Eicher Motors Limited Vs. The State of Tamil Nadu 2013 (12) TMI 629 - MADRAS HIGH COURT in favor of assessee - The petitioner has raised the above contention before the Assessing Officer while submitting his reply to the notice dated 31.12.2013 and produced the copy of the decision. However the Assessing Officer did not consider the same. Though the Assessing Officer did not consider the case of Eicher Motors Limited reliance was placed on the decision of this Court in the case of The Deputy Commissioner of Commercial Taxes vs. K. Behannan Thomas 1976 (4) TMI 202 - MADRAS HIGH COURT . In the light of the above decision even the transfer of one line of business of the petitioner namely windmill division amounts to transfer of business as a whole. The transfer of business as a whole is precisely an interpretation given by the Division Bench in the case of Eicher Motors Limited. Therefore the observation made by the Assessing Officer to that extent call for interference. Demand set aside - Decided in favor of assessee.
Issues:
1. Quashing of assessment order for levy of taxes on a specific turnover and penalty under TNVAT Act. 2. Interpretation of the provision regarding exemption claimed by the petitioner under Explanation III to sub-section 41 of Section 2 of the TNVAT Act. 3. Comparison of previous judicial decisions related to the transfer of business as a whole. Analysis: 1. The petitioner sought to quash the assessment order for the levy of taxes on a turnover and penalty under the TNVAT Act. The petitioner, a registered dealer, specifically challenged the inclusion of a turnover amount in the tax liability. The Assessing Officer contended that the petitioner had not sold their business as a whole, only a division (Windmill division), and thus, the receipt from this sale could not be excluded from tax liability. The petitioner focused on the exemption claimed under Explanation III to sub-section 41 of Section 2 of the TNVAT Act, which states that the amount realized by a dealer through the sale of the business as a whole should not be included in the turnover for tax purposes. 2. The Division Bench of the Court considered a similar issue in a previous case involving Eicher Motors Limited. The Bench analyzed various legal tests and interpretations related to the transfer of businesses as a whole. The Court emphasized the distinction between selling the entire stock-in-trade and selling the business as a running concern. It was clarified that the sale of the business as a whole, leading to the closure of a branch or division, could result in the exclusion of turnover from tax liability. The Court referred to previous decisions to support the interpretation that the transfer of a business division, if operationally independent, could be considered a sale of the business as a whole, warranting exemption from tax liability. 3. The petitioner cited the Eicher Motors Limited case to argue that even the transfer of one line of business, such as the windmill division in this instance, amounts to the transfer of the business as a whole. The Assessing Officer's reliance on a previous decision was deemed incorrect based on the interpretation provided by the Division Bench in the Eicher Motors Limited case. The Court agreed with the petitioner's contention and set aside the assessment order related to the Wind Mill Disposal value. The petitioner was allowed to pursue other demands before the competent authority under the Act, and the writ petition was granted in favor of the petitioner. This detailed analysis of the judgment highlights the key issues addressed by the Court regarding the interpretation of provisions under the TNVAT Act and the application of legal principles established in previous cases to determine tax liability concerning the transfer of businesses.
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