1975 (11) TMI 134 - HC - VAT and Sales Tax

Deduction eligibility under Bombay Sales Tax Act clarified by Court decision

The Court held that a deduction under section 8(ii) of the Bombay Sales Tax Act, 1959 can only be claimed if the goods were purchased from a registered ... - Issues:Interpretation of section 8(ii) of the Bombay Sales Tax Act, 1959 regarding deduction for resale of goods purchased from a registered dealer.Analysis:The case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, regarding the treatment of the purchase of machinery from an unregistered dealer and the entitlement to deduct the sale price of the machinery for resale to another party under section 8(ii) of the Act. The applicants purchased a machine from a company not dealing as a dealer and later resold it to a registered dealer. The dispute arose when the Sales Tax Officer disallowed the deduction claim, stating that the original seller was not a dealer in machines. The main issue was whether a deduction under section 8(ii) can be claimed if the goods were resold by a registered dealer to another registered dealer, even if the original sale was a casual one. The interpretation of the definition of a dealer under the Act and the registration requirements were crucial in determining the eligibility for the deduction.The Court analyzed the definition of a dealer under section 2(11) of the Act, which refers to a person carrying on the business of buying or selling goods. It highlighted that the Act imposes taxes on sales and purchases made by dealers in the course of their business, emphasizing that a dealer is registered in respect of a specific business of buying or selling goods, not generally. The Court referred to section 22 of the Act, which outlines the registration process for dealers and the requirement to obtain a valid certificate for a particular business. The judgment emphasized that a dealer is registered for specific classes of goods based on the application for registration and the prescribed form of the certificate, indicating the nature of the business and the goods dealt with. Therefore, the deduction under section 8(ii) can only be claimed if the goods were purchased from a registered dealer dealing in that specific class of goods.In conclusion, the Court answered the question in the affirmative, stating that unless the goods resold were purchased from a registered dealer dealing in that class of goods, there could be no claim for deduction under section 8(ii) of the Act. The judgment clarified that if the original seller was not dealing in the class of goods sold, the resale could not be considered as a sale by a registered dealer, and the deduction claim would not be permissible. The applicants were directed to pay the costs of the reference, and the reference was answered in the affirmative.