Capital asset sales are not taxable business turnover unless shown to be part of profit-motivated trading activity.

Sales of machinery imported for actual use, and not acquired for resale, were held to be casual disposals of capital assets rather than sales in the course of business. Volume, frequency, collection of tax from the purchaser, and use of L forms were held not decisive; the controlling test was whether the sales formed part of business activity with a profit motive. As the machinery was sold later at a loss and there was no evidence of an original trading intention or conversion into stock-in-trade, the sales could not be included in turnover for sales tax. The order treating them as taxable business sales was quashed.

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Issues: Whether the sales of machinery effected by the assessee were casual sales of capital assets or sales in the course of business so as to be includible in turnover and liable to sales tax.

Analysis: The order of the taxing authority rested mainly on two considerations: the volume and frequency of the sales, and the fact that tax had been collected from the purchaser and L forms had been taken. Those factors were held not to be decisive. The controlling test was whether the sales were made with a profit motive and as part of business activity. The machinery had been imported for actual use, not for resale, and there was no original intention to trade in them. Their subsequent sale at a loss supported the conclusion that they were disposed of because they were found unsuitable for the assessee's requirements. Capital assets do not become taxable trading stock merely because they are sold, unless the revenue shows that they were converted into stock-in-trade or sold as part of a design for profit.

Conclusion: The sales were casual sales of capital assets and not sales in the course of business. The order including them in turnover suffered from an error of law apparent on the record and was liable to be quashed.

Final Conclusion: Relief was granted to the assessee and the impugned sales tax order was set aside.

Ratio Decidendi: A sale of capital assets is not a taxable business sale unless the revenue establishes that it was effected with a profit motive as part of the dealer's business activity.

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