True nature of transaction controls sales tax treatment of photographic prints: skill and labour predominated, so no sale.

The Supreme Court of India applied the true-nature test to determine sales tax liability on photographic prints. A transaction is a sale only where its main object is the transfer of property in a chattel as chattel; where the dominant purpose is the exercise of skill and labour, the use of materials and incidental passing of property does not convert it into a sale. Photographic work was held to be principally a service involving skill and labour, with delivery of prints merely ancillary. The supply of photoprints was therefore treated as a contract of work and labour and not a sale of goods, so sales tax was not attracted.

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Issues: Whether the supply of photographic prints by a photographer, after taking photographs or carrying out photographic work, amounts to a sale exigible to sales tax or is a contract of work and labour.

Analysis: The decisive test is the true nature of the transaction. A contract is one of sale only where its main object is the transfer of property in a chattel as chattel to the buyer. Where the principal object is the exercise of skill and labour to produce the desired result, the fact that materials are used and property in them passes does not by itself make the transaction a sale. Applying that principle, photographic work was held to be predominantly the photographer's skill and labour, with the delivery of prints being ancillary to the service undertaken. The transaction was therefore not treated as a sale of goods.

Conclusion: The supply of photoprints by the photographer was not liable to sales tax as a contract of sale; it was a contract of work and labour, in favour of the assessee.

Ratio Decidendi: In determining sales tax liability, the substance of the transaction controls: where the dominant purpose is the exercise of skill and labour and transfer of property in goods is merely incidental, the transaction is not a sale.

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