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TMI Blog2013 (12) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... fer Agreement dated 15.12.1993 ? 2. Whether the Hon'ble Sales Tax Appellate Tribunal committed an error of law in applying the erroneous, legal test of requiring transfer of all businesses of an assessee as the only circumstance in which there could be exemption under Explanation 3 to Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959 ? 3. Whether the Hon'ble Sales Tax Appellate Tribunal committed an error of law in emphasizing on the retention of a small part of the assets in the course of business succession, while failing to apply the correct legal test, which was to determine whether the retention of the small part of the assets was to continue in the same line of business or was being retained so as not to burden the Transferee of the business?" 2. The assessment year under consideration is 1993-94. We find from the facts narrated that the assessee carried on business in Agro Engine, Light Engineering Components, in Power Genset as well as in two-wheeler. The assessee had factories at Ranipet and Thoraipakkam as well as at Thiruvotriyur. While the Agro Engine business, Light Engineering Components business were carried on at Thoraipakkam and Ranipet units, the facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the provisions of the Tamil Nadu General Sales Tax Act did not apply. The reliance placed on by the assessee in the decision reported in (1977) 39 STC 325 (Mad) in the case of Deputy Commissioner Vs. K.Behanan Thomas was also rejected by the Assessing Officer. In the process, while including the said turnover, the Assessing Officer also levied penalty under Section 12(3)(b) of the TNGST Act. 6. Aggrieved by the demand, the assessee went on appeal before the Appellate Deputy Commissioner (CT) Appeals. The assessee contented that by reason of Explanation 3 to Section 2(r) of the TNGST Act, the sale of business, viz., the Ranipet Unit and Thoraipakkam Unit being the wholesome sale, there was no question of inclusion of the sale consideration as part of the turnover. The assessee further pointed out that the separate indication of the price for the land and the materials included those goods and machinery in progress, per se, would not result in negating the right of the assessee for exemption. The assessee pointed out that as per Clause 2(b) of the agreement, it was for a composite price, as such, the assets were to be transferred at a later date. In this connection, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee went on appeal before the Sales Tax Appellate Tribunal, where the assessee reiterated the contentions taken before the authorities below viz., the Assessing Officer as well as the Deputy Commissioner (CT) Appeals. The assessee further contended before the Sales Tax Appellate Tribunal that the authorities below had taken the erroneous view as regards the terms of the contract as well as on the provisions of law and not applied the law laid down in the decision reported in 39 STC 325 (Deputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas). 12. The Sales Tax Appellate Tribunal, however, rejected the contention of the assessee based on the decision reported in 7 STC 720 (1956) in the case of Tools and Machineries Ltd., Vs. State of Madras and thus, upheld the order of assessment. Aggrieved by this, the present Tax Case (Revision) is preferred by the assessee. 13. Learned counsel appearing for the assessee took us through the decisions reported in 39 STC 325 (Deputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas), 51 STC 278 (Monsanto Chemicals of India (P) Ltd Vs. State of Tamil Nadu ), 112 STC 01 (Coromandal Fertilisers Limited Vs. State of A.P.) and pointed out that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the assessee did not arise. This Court pointed out that the sale of stock-in-trade for the purposes of closing down the business is different from the sale of the business as a whole as running concern; the sale of the business, lock, stock and barrel, was not incidental or ancillary to the carrying on of a business so as to be taxable under the Act. Thus, this Court held that the transaction in question would not fall within the scope of the Act at all, consequently, the sale proceeds would not form part of the turnover as defined under the Act. This Court further pointed out that when there was a transfer of the business as a whole or as a going concern, in both the cases, there would be transfers of certain materials. However, when it is a composite sale, the question of bifurcating certain turnover as related to the goods sold for the purposes of assessability did not arise. Pointing out to the distinction arising in the case reported in (1977) 39 S.T.C. 317 in the case of State of Tamil Nadu Vs Thermo Electrics, this Court pointed out that where the assessee retained certain assets and continued the business as a whole, the assessee could not claim the benefit of exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas in this background and looking into the facts and the contract entered into between the parties, it is clear that the contemplation of the parties herein was the transfer of two units engaged in the manufacture of Genset, Agro Engine, Light Engineering components. The assessee was having business in Light Engineering Components at Ranipet; Genset and Agro-Engine were manufactured at Thoraipakkam. The Agreement entered into between the parties dated 15.12.1993 pointed out that the assessee had agreed to sell and transfer and sale the entire business undertaking at Ranipet, which included the leasehold land, buildings, furnitures, fixtures, office equipment and existing infrastructure etc, Machinery and equipment as specified in Schedule A3 and A4 situate therein. The agreement pertaining to the running business viz., Light Engineering components, contemplates the sale of entire business including drawings, designs etc therefor, Mitsubishi Engines/Household Generator sets; all Toolings, fixtures, gauges, instruments, moulds and dies. Clause - 1 of the agreement specify the sale of Ranipet Unit in entirety as the subject matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of the Revenue. The bifurcation of the price would not in any manner go against the intention of the parties viz., sale of entire unit at Thoraipakkam and Ranipet in favour of the purchaser and going by the various terms of the agreement, we do not find any justifiable ground to accept the submission of learned Government Advocate appearing for the Revenue that the sale consideration would form part of the turnover. It is the case of the assessee that after entering into the agreement and till the Effective Date of Transfer, the assessee continued its business at Thoraipakkam and Ranipet. It is not denied by the Revenue that after entering into the agreement on and from the Effective Date of Transfer, the assessee ceased to carry on the business that was carried on at Ranipet and Thoraipakkam. The non-compete fee clearly pointed out the contention of the parties too. In the background of the above facts and applying the decision reported in 39 STC 325 (Deputy Commissioner (C.T)., Coimbatore Vs. K.Behanan Thomas) as well as the decision reported in 51 STC 278 (Monsanto Chemicals of India (P) Limited Vs. The State of Tamil Nadu), when there is transfer of business as a whole eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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