Sale of surplus cotton and cotton waste can be treated as business activity and taxed when incidental to manufacturing.

Regular disposal of surplus cotton and cotton waste arising from manufacturing can amount to an allied and incidental business activity where it bears a reasonable relation to the assessee's textile business. On that basis, the sales of such subsidiary products were treated as part of the business, allowing an intention to carry on those sales commercially to be inferred. The assessee was therefore regarded as a dealer in cotton and cotton waste, and the sales were held liable to sales tax.

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Issues: Whether the assessee, a manufacturing company, was a dealer in respect of surplus cotton and cotton waste and whether the sales of those goods were liable to be taxed.

Analysis: The assessee's regular disposal of surplus cotton and of cotton waste generated in the manufacturing process was found to bear a reasonable relation to its normal business of manufacturing and selling cotton textiles and yarn. The sale of the subsidiary product was treated as an allied and incidental business activity, from which an intention to carry on such sales as part of the business could be inferred.

Conclusion: The assessee was held to be a dealer in cotton and cotton waste, and the sales were held liable to sales tax.

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