Scientific research purchases and incidental by-products do not amount to business for sales tax purposes under the Tamil Nadu Act.

An organisation constituted solely for scientific research was held not to be carrying on "business" under section 2(d) of the Tamil Nadu General Sales Tax Act, 1959 when it purchased cotton for consumption in research and sold only the incidental cotton yarn and cotton waste generated from that process. The court reasoned that, although the statutory definition of business is wide and extends to trade, commerce and manufacture, transactions undertaken exclusively for research do not acquire that character merely because incidental by-products are sold. The purchases and resultant sales were therefore not taxable sales under the Act.

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Issues: Whether the purchase of cotton by an institution carrying on scientific research, and the sale of cotton yarn and cotton waste arising out of that research, constituted sales liable to tax under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The expression "business" in section 2(d) of the Act is wide and includes trade, commerce, manufacture, or an adventure or concern in the nature of trade, commerce or manufacture. However, where an organisation is constituted solely and exclusively for research, purchases made for the purpose of consuming them in the research process, and the sale of resultant by-products, do not partake of the character of trade or commerce. On the facts found, the cotton was bought only for research consumption, and the yarn and waste were merely incidental products of that process.

Conclusion: The transactions did not amount to business within section 2(d) of the Act and were not liable to sales tax. The revision petitions therefore failed, in favour of the assessee.

Ratio Decidendi: Where the dominant and exclusive object of an institution is scientific research, purchases made for research consumption and incidental sale of resulting products are not transactions in the nature of trade, commerce or manufacture for purposes of sales tax.

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