Taxability of obsolete machinery sales turned on whether asset disposal was incidental to the manufacturing business.

Sale proceeds from obsolete machinery and accessories used in a manufacturing business were treated as taxable turnover because the assets had been acquired and used in the trade, the sales occurred only after the goods became unserviceable and needed replacement, and the proceeds were credited to the machinery account. On those facts, the court treated the transactions as incidental or ancillary to the business within the definition of business under the Tamil Nadu General Sales Tax Act. The principle applicable to sales by a trader or manufacturer of business assets was applied, and the line of authority concerning Government auction sales was distinguished.

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Issues: Whether the sale proceeds realised from obsolete machinery and accessories used in the assessee's manufacturing business were taxable as turnover under the definition of business in the Tamil Nadu General Sales Tax Act.

Analysis: The goods had been acquired and used in the assessee's business, the sales arose only because the goods became unserviceable and had to be replaced, and the sale proceeds were credited to the machinery account. On these facts, the sale was incidental or ancillary to the trade within the meaning of section 2(d)(ii). The principle governing sales by a trader or manufacturer of assets used in the business was held to apply, while the ratio relating to sales by a Government department in annual auctions was distinguished.

Conclusion: The turnover from sale of the obsolete machinery and accessories was taxable and was rightly brought to tax.

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