1. The short question which arises for consideration in the present reference is whether the respondent-company was a dealer within the meaning of the Bombay Sales Tax Act, 1953, as regards the sale of a certain old machinery of its mill. The respondent-company carries on the business of manufacture of cloth. In the years 1953-54, 1954-55, 1955-56 and 1956-57 it sold some of its old machinery and replaced it by new machinery. In August, 1956, it sold one Roto Coner and High Speed Warping Machine for a sum of Rs. 35,700. On an application made by the company to the Deputy Commissioner of Sales Tax to determine whether the company was a dealer within the meaning of the Sales Tax Act, 1953, in respect of the said sale, the Deputy Commissioner held that the company would be a dealer and the sale would be liable to be taxed. The company then took an appeal to the Sales Tax Tribunal. The Tribunal held that the sale could not be said to be in the course of the business activity of the company and, therefore, the company would not be a dealer in respect of the said sale. Then, at the instance of the Commissioner of Sales Tax the Tribunal has drawn up a statement of the case and referred to this Court the following question :
'Whether on the fact and circumstances of the case, the opponents can be held to be dealers within the meaning of the Bombay Sales Tax Act, 1953, as regards the sale of the Roto Coner and High Speed Warping Machine ?'
2. A dealer under the Bombay Sales Tax Act, 1953, means any person who carries on the business of selling or buying goods in the pre-reorganisation State of Bombay, excluding the transferred territories, whether for commission, remuneration or otherwise and includes a State Government which carries on such business and any society, club or association which sells goods to, or buys goods from, its members. In order to decide, therefore, whether the respondent was a dealer as regards the sale of the machinery in question what has got to be decided is whether the sale has been effected by the respondent in the course of buying and selling carried on by it. It has been argued by Mr. Banaji, the learned counsel for the Commissioner of Sales Tax, that the sale of its old machinery by the respondent was in the course of its business activity. He has urged that in the first place the memorandum of association of the respondent-company has authorised it to resell from time to time machinery and plant as the directors may think proper. It has also provided for permitting the company to carry on business, apart from its main business of manufacture of cloth, in other business whether manufacture or otherwise which may seem to the company to be capable of being conveniently carried on and it has also empowered it to sell or dispose of the undertaking of the company or any part thereof. In view of these clauses of the memorandum of association, it is contended by Mr. Banaji that the sale of its old machinery could as well form part of the business of the company. He has then pointed out that it is not an isolated transaction of sale which the company has effected of its old machinery, but there has been a continuous course of transaction extending over several years during which period old machinery worth considerable amount has been disposed of by the company. Thus, in 1953-54 the company has disposed of old machinery of the value of Rs. 26,570-14-0. In 1954-55 it has again sold old machinery worth Rs. 36,960 and in the subsequent two years the value of the old machinery sold is Rs. 73,059-62 nP. and Rs. 3,12,761-87 nP. respectively. The sale in question of the Roto Corner and High Speed Warping Machine was one of the transactions of a series of transactions by the company during these several years. According to Mr. Banaji, therefore, having regard to the volume and frequency of these transactions, the sales effected by the company, including the present sale in question, were sales as dealer within the meaning of the Bombay Sales Tax Act, 1953. He has invited our attention to some cases in support of his submission.
3. Now there is no doubt that there is a reference in the object clauses in the memorandum of association of the respondent-company to the company's power to resell from time to time its plant and machinery or to carry on any other business and to sell and dispose of any part of the undertaking, but the said power contained in the memorandum of association would not be sufficient to hold that any particular sale of its old machinery by the respondent-company is in the course of its business. As has been observed by the Supreme Court in Oriental Investment Co. Ltd. v. Commissioner of Income-tax, Bombay : 32ITR664(SC) , the mere fact that a company has within its objects the dealing in investment in shares, does not give to the company the characteristics of a dealer in shares. As observed by Romer, L.J., in Wilson Box (Foreign Rights), Ltd. (in liquidation) v. Brice (H. M. Inspector of Taxes) (1936) 20 Tax Cas. 736, 'the mere fact that a company has power to sell a particular asset, or all its assets, does not in the least imply that it is part of the business of the company to sell that particular asset or its assets. Most people of sound mind and understanding have power to dispose of their property. It does not follow from that that they carry on the business of buying and reselling property such as that which they possess.' In Seksaria Biswan Sugar Factory Ltd. v. Commissioner of Income-tax (Central) Bombay : 18ITR139(Bom) , this Court observed 'Every act which is intra vires of a company is not necessarily done in the course of its business. Whether a particular act done is in the course of business or not is really a question of fact and that must be determined according to the evidence led and the circumstances of the case. It must be found as to whether the particular act has any connection with the normal business that the company is carrying on and whether it is so related to the business of the company that it can be considered to be performed in the ordinary course of the business of that company.' The mere fact, therefore, that the company by its memorandum of association has possessed the power to resell its machinery will not mean that the sale of old machinery by the company has been effected by it in the course of its business.
4. Mr. Banaji's argument is that in order to find out whether certain transactions of sale have been in the course of the business, what has got to be found out is the volume of the transactions and the degree of frequency of similar transactions. In the present case, he says, there has been a large volume of these transactions and there has been a frequency of similar transactions occurring during several years. Inasmuch as these sales by the company were not isolated sales at irregular intervals but a continuous course of transactions extending over several consecutive years, the transactions constitute a course of business activity on the part of the respondent. Mr. Banaji in this connection has invited our attention to a decision of the Kerala High Court in Gosri Dairy, Vyttila v. The State of Kerala  12 S.T.C. 683. In that case the assessee-firm which was registered as a dealer in daily products sold away a part of its live-stock and replaced the same by fresh live-stock. The question that arose for consideration was whether the annual sale of live-stock could be treated as part of the turnover of the assessee liable to sales tax, and it was held by the Full Bench of the Kerala High Court that the frequency, regularity and the volume of sales of cattle by the assessee were such that they could be regarded as an activity in the course of the business of the assessee and therefore the assessee's sales of cattle were part of its business, constituting it a dealer within the meaning of the Sales Tax Act, and attracted liability to taxation in respect thereof. The sale of dry cattle was a regular annual feature and was carried on continuously from year to year by the assessee-company. It was not a case of casual or isolated transaction but constituted acts systematically and regularly carried on in the course of the business of the assessee-firm itself. The sale of the dry cattle was co-extensive with the business of manufacture of dairy products. It was in those circumstances that the view was taken by the Court that the transactions constituted sales in the course of business activity of the assessee. Frequency, regularity and volume of the transactions will no doubt be factors relevant and helpful in determining whether any particular transactions are in the course of business or not, but the mere existence of these factors will not by themselves be sufficient to hold that the transactions are business transactions. As has been observed by the High Court of Madhya Pradesh in Commissioner of Sales Tax, Madhya Pradesh, Indore v. Ram Dulare Balkishan and Bros.  14 S.T.C. 202, the true test is not whether the selling activity is continuous or repeated but whether the carrying on of continuous operations is with a view to earn profit. In that case the question to be considered was whether the sales of unserviceable vehicles and motor accessories by the assessee, which was a transport undertaking, were sales by a dealer in the course of its business activity. The sales had been continuous and large, and it was contended that because of these features they constituted an activity coming within the definition of a dealer given in the Act. It was held that while these features were no doubt relevant for the consideration of the question, they were by no means conclusive and the true test was whether the selling activity was with a view to earn profit. In A. Ebrahim and Company v. State of Bombay  13 S.T.C. 877, this Court pointed out : 'The test, in our opinion, then is to ascertain whether in the circumstances and on the facts of the case it can be said that a particular sale is a sale in the course of business of a dealer. If the sale has a reasonable connection with the nature of the business carried on by a dealer, then the sale would be in the course of his business. If there is no such reasonable connection between the sale effected and the nature of the business carried on by the dealer, then the sale cannot be said to be in the course of the business of the dealer and its sale proceeds cannot therefore be included in his turnover.' Now, according to the findings of the Tribunal in the present case, the sale of the old machinery by the respondent-company has not been done with a view to make profit on the said sale but only with a view to replace it by new machinery, the old machinery having become unserviceable or less serviceable. The Tribunal has also observed, 'we are satisfied that the sale of the old machinery and its substitution by the new one is not the business of the appellants though these transactions are necessary for the effective carrying on their business.' In view of these findings of the Tribunal, although the sale of the Roto Coner and High Speed Warping Machine has been an item of several such transactions of sale of old machinery of considerable volume which have been effected by the respondent-company during the years 1953-54 to 1956-57, the sale could not be said to have been done in the course of its business activity and, therefore, the respondent-company would not be a dealer as regards the said transaction. The business of the respondent-company was the manufacture of cloth. For the said business the company had from time to time replaced its old and unserviceable machinery by new machinery although such replacements of the old machinery by new machinery may have been necessitated for the purposes of the business of the company. The disposal of the old machinery for the purposes of replacing it by new machinery cannot be said to be a part of business of the respondent-company.
5. In our opinion, therefore, the answer to the question referred to us in the present case must be in the negative. We answer it accordingly. The Commissioner will pay the costs of the respondent.
6. Reference answered in the negative.