Going-concern sale of a distinct business unit falls outside taxable turnover and may still qualify for deduction under rule 6(d).

Sale of an independent business unit as a going concern, with its assets, liabilities, goodwill, contracts and obligations, was treated as a transfer of a distinct line of business rather than a sale in the course of carrying on business. On that reasoning, the sale proceeds were outside taxable turnover and not exigible to sales tax. Alternatively, even if rule 6(d) of the Tamil Nadu General Sales Tax Rules, 1959 applied, the proceeds were deductible because the exemption did not require the assessee to cease all other business activity. The disputed turnover was therefore held eligible for exemption.

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Issues: Whether the sale of a distinct line of business as a going concern was outside the ambit of turnover and, alternatively, whether the sale proceeds were deductible under rule 6(d) of the Tamil Nadu General Sales Tax Rules, 1959.

Analysis: The transfer was of a business unit as a going concern, together with its assets, liabilities, goodwill, contracts and obligations, and not a mere sale of goods in the course of carrying on business. A closure of one line of business, like the sale of an independent branch or unit, is not incidental or ancillary to the carrying on of that business. On the reasoning already adopted in prior authority, the sale proceeds of an independent business unit sold as a whole do not constitute taxable turnover; even on the assumption that rule 6(d) applies, the proceeds of such a sale fall within the exemption because the assessee is not required to cease all business activity for the rule to operate.

Conclusion: The disputed turnover was not exigible to sales tax and was eligible for exemption.

Ratio Decidendi: The sale of an independent business unit or line of business as a going concern is not a sale in the course of business and its proceeds are not part of taxable turnover; alternatively, such proceeds are deductible under rule 6(d) even if the assessee continues other business activities.

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