1. The dispute before us relates to the assessment of the assessee on sales effected by him in the year of assessment on two items, namely, (1) sale of a cinema projector for Rs. 1,000 and (2) sale of the negative film of 'Tour of Mahatma Gandhi' sold to Gandhi Samarak Nidhi for Rs. 8,000. The business in which the assessee is engaged is as a dealer in cinematographic goods. It is common ground that the nature of the business activity he is engaged in involves the following transactions. He used to purchase from abroad film projectors and sell them. He used to take educational films and exhibit them for remuneration in schools and other institutions with the help of some of his projectors. There was a market for the positives of such films taken by him, and he used to sell the positives and retain the negatives for some years.
2. In regard to the first item, the contention of the assessee before the assessment authorities was that the concerned film projector was purchased by him in 1946 and was used by him for, several years for exhibition of educational films, which was one of the activities in which he was engaged, and then he sold it in the year of assessment. In regard to the sale of the negative film of the 'Tour of Mahatma Gandhi', the assessee contended that the tour was in 1946 and in that year the film was taken, that after using it for over 8 years, during which period he sold several positives of the film, he sold the negative to Gandhi Samarak Nidhi on account of the request of the latter to sell the negative to it for the purpose of preservation. As a result of the above-mentioned nature of the transactions, the assessee contended that the sales were not in the course of his business and were not assessable to sales tax. This contention was negatived both by the assessing authority as well as by the Sales Tax Appellate Tribunal. The present revision case is filed before us disputing the above decision.
3. The question as to how far a particular sale is a sale in the course of business attracting the levy of sales tax is a question to be decided with reference to the circumstances of each case. It is admitted that the appellant's business is carried on with a profit-motive. He is not a mere exhibitor of educational films for cultural or educative purposes. As long as the sale of positives gave a good income he retained the negatives. But a point of time could be reached in the course of the business, when he might have found it more profitable to sell away the negative itself without retaining it any longer for taking positives and disposing of them. It is admitted by the assessee that subsequent to the sale of the 'Tour of Mahatma Gandhi' film, he took a film entitled 'Conditions in Burma' and sold away both the positive and negative. Therefore, from the circumstance that he had kept the negative and sold only the positives of the film of the 'Tour of Mahatma Gandhi' for 8 years, and then ultimately decided to sell the negative to Gandhi Samarak Nidhi, who might have been a favoured purchaser, it could not be considered that he was effecting the sale of the negative film dissociated from the general business activity in which he was engaged, whose features have been mentioned above. There was, on the other hand, reasonable connection between the two.
4. Regarding the sale of the cinema projector, learned Counsel for the assessee before us, contended that he utilised some of the projectors from his stock for the purpose of exhibiting films in educational institutions and derived profit from that activity. The projectors put to this use had been treated by the Income-tax Authorities, for the purpose of income-tax assessment, as capital goods and depreciation allowed in respect of them. When projectors thus used for the purpose of exhibition of films were subsequently sold, as in this case, the assessee contends that such sales should be dissociated from his business activity and should be exempt from sales tax.
5. The tests to find out whether a particular transaction of sale is part of the business activity of a dealer so as to attract the levy of sales tax have been laid down in a number of decisions, both of this Court as well as of other Courts in India. In one of the earliest cases of this Court reported in Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Sri Lakshmi Saraswathi Motor Service, Gudiyattam  5 S.T.C. 128, the assessee was a motor transport company engaged in the business of providing public transport. Buses used in transport as and when they became unserviceable or useless were sold either as old buses or scrap. It was held by this Court that by reason of these isolated transactions, the assessee could not be treated as dealers in buses within the meaning of the Sales Tax Act. In State of Bombay v. Ahmedabad Education Society  7 S.T.C. 497, the assessee was an education society which had as its objects the spread of education, the starting and taking over of arts colleges, and other similar objects. In furtherance of these objects, they gave a contract to a contractor for construction of buildings. They set up a brick factory and supplied bricks manufactured therein to the contractor. The remaining bricks, over and above what was required for the construction work, were disposed of to sister educational institutions at cost price. The High Court of Bombay, in the above circumstances, held that the society was not a dealer liable to pay sales tax on the sales of bricks, as there was no intention on its part to sell the goods at the time when the goods were manufactured. At page 500 of the report they observed:.the expression carrying on the business of selling or supplying goods' must be construed in a commercial sense. A person may either produce goods or purchase goods with the object ultimately of selling them. Unless that object is present and unless that intention is clear, the mere activity of selling or supplying would not constitute the carrying on of business of selling or supplying.
6. In the present case, the intention to sell cinema projectors and sell positives as well as negative films were present in the mind of the seller when he acquired the cinema projectors and produced the negative films. No doubt an interval of time subsequently elapsed, during which he devoted some of these projectors for the purpose of exhibiting the films and used the negative films for taking positives-out of them and selling them at a profit; but such conduct would not exclude the existence of an intention to sell the projectors as well as the negative of the films, when it was advantageous for him to do so.
7. The next decision referred to before us, Ebrahim & Co. v. The State of Bombay  13 S.T.C. 877, is also a decision of the Bombay High Court. The business of the assessees was wholesale and retail sale of separated parts of ship machinery and ferrous and non-ferrous metals. They purchased a ship reserving the option of either using the ship for trading purposes or breaking it up and selling separated parts. They subsequently entered into an agreement with another company to sell the ship for a consideration of Rs. 4 lakhs. The question arose whether that sale would attract sales tax. The High Court observed that the sale of the ship as such had a very close connection with and was akin to, the normal course of business of the applicant, and was in the course of its business activity. At page 884 of the report, the Bombay High Court observed:
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. Though a particular commodity at any prior point of time was not sold by the dealer in the course of his business, or the fact that he had not frequently sold a particular commodity would not necessarily be decisive in ascertaining whether a particular sale has been made in the course of business or not, though no doubt they would be relevant pieces of evidence and of assistance for determination of the issue.
8. In Commissioner of Sales Tax v. Hindoostan Spinning and Weaving Company Limited  15 S.T.C. 69, the assessee-company was a manufacturer of cloth. It had to sell some of its old machinery and replace it by new machinery. A question arose whether the sale of the old machinery attracted sales tax, and the High Court of Bombay adopted the test laid down in its earlier decision in Ebrahim & Co. v. State of Bombay  13 S.T.C. 877 as to whether the sale had a reasonable connection with the nature of the business carried on by the dealer, and held that the sale did not attract sales tax.
9. In the decision reported in Gannon Dunkerley & Co. v. Government of Madras  15 S.T.C. 40, the assessees were building contractors. They objected to the inclusion in their turnover the sale value of materials such as broken bricks, jelly and cement left over after the completion of the building contracts on the ground that they were not dealers in those materials and that the sales of those materials were only incidental to the carrying on of the contract work. This contention was negatived and the test laid down by the Bombay High Court in Ebrahim & Co. v. State of Bombay  13 S.T.C. 877, of the existence of a reasonable connection with the normal course of business of the assessee and whether the intention of the assessee was to effect that sale in the course of that business was applied. The learned Judges observed that when the necessity of disposal of the surplus materials was ingrained in the very nature of the business which the assessee carried on and he had to effect sales of such surplus materials, there was no reason why he could not be regarded as a dealer selling goods in the course of his business.
10. In United Bleachers Ltd. v. State of Madras  11 S.T.C. 278, this Court dealt with an assessee whose business was bleaching cloth. They sold packing materials used in the performance of their contract with their customers. At page 281 of the report, Ramachandra Iyer, J. (as he then was) observed:
The profit-motive necessary to render a business one contemplated by the Act would be one embracing the whole business, and not in respect of each one of the component parts of the business. It is not necessary either that the dealer should deal specifically in that article.
11. In Aryodaya Spinning and Weaving Co. Ltd. v. State of Bombay  11 S.T.C. 141, the assessee was carrying on the business of manufacturing cotton textiles and yarn. A question arose whether the sales of excess cotton and cotton waste would attract sales tax. It was held by the Bombay High Court that though the normal business of the assessee was the manufacture of yarn and cloth, cotton waste, which was a subsidiary product, was normally sold and, in the circumstances, an intention to carry on business of selling the subsidiary product as a part of or an incident of the business of the assessee, might readily be inferred and the transaction of sale might be regarded as an activity in the course of the business of the assessee.
12. In a recent decision of this Court in Sadak Thamby & Co. v. State of Madras  14 S.T.C. 753, the assessee was a dealer in hides and skins. For the purpose of tanning them, he had purchased tanning materials. Purchase of tanning materials was assessable at the purchase point. It was contended that the purchase of tanning materials was not connected with the business of dealing in hides and skins, and since the tanning materials went into the manufacture of tanned hides and skins, there was no profit-motive in regard to their purchase. This claim was negatived by this Court and it was observed that the use of the tanning materials in the tanning process contributed to the making of profit as a dealer and it should therefore follow that even the business of purchasing the tanning materials involved a profit-motive.
13. There is no doubt in the present case about the existence of a profit-motive. It is not contended by the assessee that any of his activities was undertaken out of purely cultural or educative motives, though he exhibited films in schools and other educational institutions. But in every case he seems to have had any eye on the profit part of the transaction. Stress was laid on the fact that ordinarily he was not selling negative films and that he was more concerned with the sale of positive films. But the question will always arise in the case of such a business activity whether at some point of time the dealer might have found it more advantageous to dispose of the negative films for a profit, if there were purchasers for such negative films, instead of keeping them and selling only the positive, and whether such sales had a reasonable connection with his business activity. That is what he seems to have done in the case of the sale of 'Tour of Mahatma Gandhi' to Gandhi Samarak Nidhi, and such a sale must be considered to have been a part of his business activity. It is not contended that in regard to that sale the profit-motive was absent.
14. So far as the sale of the projector is concerned, it has been conceded throughout by the assessee that the sale of such projectors was part of his business. But after the restriction on the imports of projectors, the number of such sales effected by him diminished and the occasion for such sales became few and far between. He found it more advantageous to keep his projectors with him for long periods for the purpose of exhibiting films for a profit, and select a proper time for disposing of the used projectors. The learned Counsel for the assessee referred to the fact that the Income-tax Authorities had treated them as capital stock and allowed depreciation. The learned Government Pleader submitted that this fact would not have any bearing on the question whether the sales of such commodities were effected for the purpose of earning profit and whether they were in the course of the dealer's business activity of buying and selling. These latter factors will be germane for the purpose of levy of sales tax. The circumstances of the case clearly show that the essential ingredients of sale in the course of the business activity existed in respect of these transactions and their assessment to sales tax must be upheld. The revision case is dismissed. There will be no order as to costs.