Capital asset sale on business closure lacked business nexus and was excluded from taxable turnover.

Under the U.P. Sales Tax Act, 1948, the definition of "dealer" was confined to transactions connected with the dealer's business. The Allahabad HC held that sale proceeds from machinery sold on closure of business were not includible in taxable turnover because the machinery was a capital asset and not an item in which the assessee carried on the business of buying or selling. An isolated disposal of assets lacks the necessary business nexus and is not taxable merely because the seller is otherwise a dealer.

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Issues: Whether the sale proceeds of machinery sold on closure of the business could be included in the assessee's taxable turnover under the U.P. Sales Tax Act, 1948.

Analysis: The definition of dealer under section 2(c) of the Act was held to be confined to transactions connected with the business carried on by the dealer. The sale of machinery, being a capital asset and not an item in which the assessee carried on the business of buying or selling, lacked the necessary business nexus. The Court distinguished sales of goods that are part of the dealer's ordinary trading activity from isolated disposals of assets, and held that such a disposal is not taxable merely because the seller is otherwise a dealer.

Conclusion: The sale proceeds of the machinery were not includible in the taxable turnover, and the answer was against taxability.

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