Transfer of business requires a running business; a sham sale aimed at securing possession does not attract sales tax consequences.

A transaction described as a sale of business will not be treated as a transfer of business under section 26(1) of the Bombay Sales Tax Act, 1953 where the surrounding circumstances show that no running business existed to be transferred. The Bombay High Court noted that the original business had already ceased, the alleged transferee did not continue the kirana business, and the document and contemporaneous conduct supported the inference that the real object was to obtain vacant possession of the premises for a new business. Those facts were held sufficient to sustain the Tribunal's finding that the transfer recitals were false.

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Issues: (i) Whether the respondent was a transferee within the meaning of section 26(1) of the Bombay Sales Tax Act, 1953. (ii) Whether there was evidence to support the Tribunal's finding that the real object of the transaction was to obtain vacant possession of the premises for carrying on a different business and that the recitals of transfer of business were false.

Issue (i): Whether the respondent was a transferee within the meaning of section 26(1) of the Bombay Sales Tax Act, 1953.

Analysis: The transaction described as a sale of business was found, on the surrounding circumstances, not to be a genuine transfer of an existing running business. The business of the transferor had already ceased before the date of the document, the transferee did not in fact continue the alleged kirana business, and the arrangement effectively secured the tenancy rights and occupation of the premises for a new business.

Conclusion: The respondent was not a transferee of business within the meaning of section 26(1) of the Bombay Sales Tax Act, 1953.

Issue (ii): Whether there was evidence to support the Tribunal's finding that the real object of the transaction was to obtain vacant possession of the premises for carrying on a different business and that the recitals of transfer of business were false.

Analysis: The Tribunal relied on the closure of the old business prior to the transfer, the transferee's failure to carry on the alleged business, the contemporaneous conduct of the parties, and the terms of the document itself. These circumstances constituted sufficient material to sustain the inference that the transaction was aimed at obtaining possession of the premises rather than transferring a live business.

Conclusion: There was evidence to support the Tribunal's finding, and the answer to this issue is in the affirmative.

Final Conclusion: The answers to the reference established that the transaction did not amount to a transfer of business, and the assessee succeeded on the substantive controversy.

Ratio Decidendi: A transaction will not attract transfer-of-business consequences where, on the facts, no running business existed to be transferred and the arrangement is in substance only a device to secure possession or tenancy of premises for a new business.

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