Scrap sales are taxable as incidental business transactions, but transfer of a closed division's assets is outside turnover.

Under the amended sales tax definition of business, transactions incidental or ancillary to trade may be taxable even without a profit motive. Sales of scrap and unserviceable materials arising in the course of a transport business were treated as taxable because the company was regarded as a dealer for those incidental sales. By contrast, the transfer of machinery and workshop assets on closure of an entire business division to a newly formed company was not an incidental or ancillary trading transaction and fell outside taxable turnover.

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Issues: (i) Whether the assessee was a dealer and whether sales of scrap and unserviceable materials arising in the course of its transport business were taxable as incidental or ancillary to that business. (ii) Whether the value of machineries transferred on closure of the workshop division to a newly formed company formed part of taxable turnover.

Issue (i): Whether the assessee was a dealer and whether sales of scrap and unserviceable materials arising in the course of its transport business were taxable as incidental or ancillary to that business.

Analysis: The amended definition of business was construed to include transactions incidental or ancillary to trade or commerce even without profit motive. The Court followed the Supreme Court ruling that a concern carrying on business may be treated as a dealer for sales of scrap and unserviceable articles arising in the course of that business. As the assessee was a company and its memorandum enabled buying and selling, the contrary view taken by other High Courts could not prevail over the binding Supreme Court authority.

Conclusion: The assessee was a dealer and the sales of unserviceable or scrap materials were liable to tax.

Issue (ii): Whether the value of machineries transferred on closure of the workshop division to a newly formed company formed part of taxable turnover.

Analysis: The transfer related to the closing down of one division of the assessee's business and the assets of that workshop were transferred as a whole to another company. A sale of an line of business, or transfer arising from closure of a business division, was not treated as an incidental or ancillary trading transaction. On that footing, the amount realised from the transfer of the workshop assets was outside the taxable turnover.

Conclusion: The value of the machineries transferred on closure of the workshop was not taxable.

Final Conclusion: The assessee succeeded only in part, as tax was upheld on scrap sales but disallowed on the transfer of workshop machinery.

Ratio Decidendi: Under the amended sales tax definition, a business concern is liable on sales of scrap and unserviceable materials arising incidentally from its business, but a transfer of an entire closed business division is not an incidental or ancillary sale and does not form part of taxable turnover.

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