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Andhra Pradesh State Road Transport Corporation Vs. the Commercial Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 751 of 1967
Judge
Reported in[1971]27STC42(AP)
AppellantAndhra Pradesh State Road Transport Corporation
RespondentThe Commercial Tax Officer
Appellant AdvocateT. Anantha Babu, Adv.
Respondent AdvocateS. Ramachandra Reddy, Adv. for the Principal Government Pleader
DispositionPetition allowed
Excerpt:
- - the decision of this writ petition depends upon the view we take as to the nature of the activity of the corporation in disposing of the scrap material and precisely whether such activity could be termed its business.madhava reddy, j. 1. the andhra pradesh state road transport corporation was provisionally assessed to sales tax on a taxable turnover of rs. 4,85,321 in respect of the sale of scrapped vehicles and other scrap effected during the period 1st april, 1966, to 30th september, 1966. the corporation contends that these transactions could not be deemed to be business of the corporation so as to make it liable to be assessed to tax on the value realised by such sale.2. the andhra pradesh state road transport corporation is constituted under the road transport corporation act, 1950. the object of this corporation is to provide or secure or promote the provision of an efficient, adequate, economical and properly co-ordinated system of road transport service in the state. it is not a trading.....
Judgment:

Madhava Reddy, J.

1. The Andhra Pradesh State Road Transport Corporation was provisionally assessed to sales tax on a taxable turnover of Rs. 4,85,321 in respect of the sale of scrapped vehicles and other scrap effected during the period 1st April, 1966, to 30th September, 1966. The Corporation contends that these transactions could not be deemed to be business of the Corporation so as to make it liable to be assessed to tax on the value realised by such sale.

2. The Andhra Pradesh State Road Transport Corporation is constituted under the Road Transport Corporation Act, 1950. The object of this Corporation is to provide or secure or promote the provision of an efficient, adequate, economical and properly co-ordinated system of road transport service in the State. It is not a trading Corporation. Ever since it was constituted in 1958 it has been operating bus services on various routes in the State. In the course of its activity, scrapped vehicles, old tyres, old containers and other unserviceable material were left with the Corporation which it has been disposing of periodically by public auction or by inviting tenders. The proceeds of the sale of this material is sought to be included in the taxable turnover of the Corporation for the purpose of assessing it to sales tax. The decision of this writ petition depends upon the view we take as to the nature of the activity of the Corporation in disposing of the scrap material and precisely whether such activity could be termed its business. 'Business' is defined in Section 2(bbb) as follows:

2. (bbb) 'business' includes,--

(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on or undertaken with a motive to make gain or profit and whether or not any gain or profit accrues therefrom; and

(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern.

3. In view of the terms of its incorporation the Andhra Pradesh State Road Transport Corporation is not authorised to carry on any activity except that of providing or securing or promoting the provision of an efficient, adequate, economical and properly co-ordinated system of road transport service in the State. It is not one of its objects to carry on the business of purchase or sale of any scrapped vehicles or other types of scrap. In State of Madras v. K.C.P. Ltd. A.I.R. 1969 S.C. 348, the Supreme Court dealt with the case of a company carrying on a business of manufacture and sale of machinery and parts of machinery and accessories for manufacturing which the company maintained a foundry and purchased two arc furnaces with a view to utilise the same in its foundry but later found it unsuitable for the purpose and disposed of the same at a profit and the assessing authorities sought to include the amount realised by such sale in the turnover of the company. It was held that where a person in the course of carrying on the business was required to dispose of what may be called his fixed assets or his discarded goods acquired in the course of business an inference that he desired to carry on the business of selling his fixed assets or his discarded goods would not ordinarily arise. The arc furnaces were either fixed assets or discarded goods which had been found to be unserviceable or unsuitable. The assessee could, therefore, hardly be said to be a dealer within the definition given in Section 2(b) of the Central Act in relation to their sale and the sale proceeds of the arc furnaces could not be included in the turnover of the assessee. In State of Gujarat v. Raipur . [1967] 19 S.T.C. 1 (S.C.) dealing with a case arising under the Bombay Sales Tax Act, 1953, it was held that in the turnover of a person carrying on the business of selling one commodity will not be included the price received by him by sale of another commodity, unless he carries on the business of selling that other commodity In that case where the company which was carrying on the business of manufacturing and selling cotton textiles, disposed of miscellaneous old and discarded items such as stores, machinery, iron scrap, cans, boxes, cotton, ropes, rags etc., the Supreme Court held that it cannot be said to carry on the business of selling these items of goods. 'From the fact that the sales of these items were frequent and their volume was large it cannot be presumed that when the goods were acquired there was an intention to carry on the business in these discarded materials. Nor are the discarded goods, by-products or subsidiary products of or arising in the course of the manufacturing process. A person who sells goods which are unserviceable or unsuitable for his business does not on that account become a dealer in those goods, unless he has an intention to carry on the business of selling those goods.' In view of these pronouncements of the Supreme Court, the Andhra Pradesh State Road Transport Corporation which is primarily constituted for operating an efficient road transport service, could not be held to be carrying on business of selling the discarded vehicles and other scrap which it has come into possession in the course of its activities. It is, however, argued by Mr. Ramachandra Reddy, learned counsel for the Government Pleader that the sale of these goods was a transaction in connection with or incidental or ancillary to such trade, commerce, manufacture, adventure or concern within the meaning of Clause (ii) of Section 2(bbb) and, therefore, properly included in the taxable turnover of the petitioner. To our mind any incidental or ancillary transaction or activity should be in connection with the trade or commerce or adventure carried on by the petitioner and should itself partake of the nature of trade, commerce, manufacture, adventure or concern. In State of Gujarat v. Vivekanand Mills [1967] 19 S.T.C. 103 (S.C.), where the assessee was carrying on the business of manufacturing cotton fabrics, had agreed to purchase under user's import licence 500 bales of Californian cotton in January, 1953, and believing that the shipment would arrive after six months, the assessee purchased 300 bales of similar cotton to meet its immediate requirements but finding that the consignment from California arrived much earlier than expected even in April, 1953, it was obliged to dispose of 411 bales of the cotton already purchased by it. It was contended that this sale constituted 'business' and the said turnover was liable to tax as being a business activity incidental to its main business of manufacturing cotton textiles. Dealing with this contention the Gujarat High Court held that such, a disposal even if made with a profit-motive would not make a part of the business or an incident to the business of the assessee. The Supreme Court on appeal held that in those circumstances no intention on the part of the assessee to carry on business of selling cotton could be inferred and upheld the conclusion arrived at by the High Court in that behalf. In view of the above, the Commercial Tax Officer was not right in holding that the Andhra Pradesh State Road Transport Corporation was a 'dealer' carrying on 'busness' in the old or scrapped vehicles and other scrap. He was, therefore, not entitled to even provisionally assess it to sales tax. The assessment order is, therefore, quashed. In the result, the writ petition succeeds and is accordingly allowed with costs. Advocate's fee Rs. 100.


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