Transferee liability for sales tax dues applies only when business ownership is fully transferred, not under a limited running contract.

Liability for a transferor's sales tax dues under section 26(1) arises only where the business ownership is entirely transferred to the transferee. On the agreement's terms, a limited contract to run the hotel for a fixed term did not amount to an outright transfer: the owners retained the premises, profit share, rights and interests in the business, while the arrangement also restricted assignment and required indemnities. The assets and goodwill were not transferred in a manner showing complete divestment of ownership. The transferee-liability provision was therefore inapplicable on the facts found, and the Tribunal's view was upheld.

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Issues: Whether, on a true construction of the agreement and section 26(1) of the Bombay Sales Tax Act, 1953, the respondents were transferees of the business so as to attract liability for the transferor's sales tax dues.

Analysis: Liability under section 26(1) arises only when the ownership of the transferor's business is entirely transferred to the transferee. On the terms of the agreement, the respondents did not part with ownership of the hotel business. The arrangement gave Bharucha only a limited contract to run the hotel for a fixed term. The owners retained the premises, the fixed share in profits, and their rights and interests in the business. The agreement also restricted assignment, required indemnities in favour of the owners, and did not transfer ownership of the assets or goodwill in a manner showing an outright transfer of the business.

Conclusion: The respondents were not transferees within section 26(1), and the sales tax liability of Bharucha could not be fastened on them.

Final Conclusion: The reference was answered in favour of the respondents, with the Tribunal's view upheld and the transferee-liability provision held inapplicable on the facts found.

Ratio Decidendi: A transferee's liability for a transferor's sales tax dues arises only where the ownership of the business is entirely transferred, and a mere contract to run the business for a limited period without transfer of ownership does not amount to such a transfer.

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