Dominant purpose test confirmed a harbour ferry contract as a sale rather than work and labour.

The contract for construction and supply of a harbour ferry was treated as a contract of sale, not a contract for work and labour, because its real substance was the transfer of a completed vessel for a price. The builder supplied most of the materials, manufactured the ferry at its own yard under the buyer's supervision, and was obliged to deliver the finished article on completion. Stage payments and insurance arrangements did not alter the dominant character of the transaction. The assessee's revision was rejected, and the transaction was sustained as a taxable sale.

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Issues: Whether the contract for construction and supply of a harbour ferry was a contract of sale or a contract for work and labour.

Analysis: The contract was examined as a whole and its real substance was found to be the transfer of a completed ferry for a price. The materials were largely the builder's own, the vessel was manufactured at the builder's yard under the buyer's supervision, stage payments and insurance arrangements did not change the essential character of the transaction, and the buyer was to receive the finished ferry on delivery. The contractual clauses relied upon by the assessee did not show that the agreement was predominantly one for work and labour; rather, they supported the conclusion that the builder was to deliver the finished vessel as a commercial article.

Conclusion: The contract was held to be a contract of sale and not a contract for work and labour, and the assessee's revision was rejected.

Final Conclusion: The transaction was treated as a taxable sale of the ferry, so the assessment position in favour of the revenue was sustained.

Ratio Decidendi: In determining whether a contract is one of sale or of work and labour, the decisive test is the substance and dominant purpose of the transaction, with particular emphasis on whether the completed article is transferred as property for a price.

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