1976 (10) TMI 65 - AT - Income Tax

Summary

Issues Involved:
1. Whether the joint venture of the assessees is not business as defined in s. 2(d) of the Act and the assessees are not dealers as defined in s. 2(g) of the Act?
2. Whether the assessee should be treated as second sellers, since Tvl. Burmah Shell Co. is the first seller?
3. Whether the goods purchased and sold by the assessee were not in the course of business?
4. Whether the disputed turnovers related to the sale of declared goods falling under s. 14(iv) of the C.S.T. Act?
5. Whether the penalty imposed for 1971-72 is valid and correct?

Detailed Analysis:

Issue 1: Business Definition and Dealer Status
The Tribunal examined the partnership agreement and the subsequent transactions of the assessees. It was found that the joint venture was formed specifically for purchasing and reselling properties, including movables embedded in immovable properties. The Tribunal concluded that the joint venture constituted a "business" as defined in s. 2(d) of the Tamil Nadu General Sales Tax Act and that the assessees were "dealers" as per s. 2(g) of the Act. The Tribunal cited various correspondences and agreements to support that the intention behind the joint venture was to engage in business activities involving the purchase and resale of properties.

Issue 2: First Seller Status
The Tribunal analyzed the sale agreement between the assessees and Tvl. Burmah Shell Co. and determined that Burmah Shell Co. intended to sell immovable properties along with embedded movables as a single package. The Tribunal found no evidence that Burmah Shell Co. sold the movables separately. Therefore, Burmah Shell Co. could not be considered the first seller of the movable items. The assessees, having dismantled and sold these items, were deemed the first sellers.

Issue 3: Course of Business
The Tribunal noted that the assessees had entered into a joint venture agreement with the specific purpose of acquiring and reselling properties, including movables. The sales of these movables were part of the business activities of the joint venture. The Tribunal concluded that the sales were indeed in the course of business, thus subject to sales tax.

Issue 4: Declared Goods
The Tribunal reviewed the nature of the goods sold by the assessees to determine if they fell under the category of declared goods as per s. 14(iv) of the Central Sales Tax Act. It was found that certain items, such as old storage tanks and pipes, were sold as scrap and thus qualified as declared goods. However, other items like a generator set and an engine were not proven to be declared goods. The Tribunal ruled that sales tax should be levied at 3% on the declared goods and at 3.5% on other items.

Issue 5: Penalty Validity
The Tribunal reviewed the imposition of penalty under s. 12(3) of the Act. It was observed that the assessees had voluntarily registered themselves and submitted correct returns after receiving notices. Given the disputed nature of the assessments and the voluntary compliance by the assessees, the Tribunal found that the penalty was not justified. The penalty for 1971-72 was canceled.

Conclusion:
- T.A. No. 995/75: Partially allowed. Sales tax to be levied at 3% on declared goods amounting to Rs. 4,79,002. Penalty canceled. Other orders confirmed.
- T.A. No. 953/75: Partially allowed. Sales tax to be levied at 3% on declared goods amounting to Rs. 7,36,594. Other orders confirmed.