Sale of a business as a whole permits deduction where the transferred unit is sold as a going concern despite other businesses continuing.

For deduction under rule 9(g) of the Kerala General Sales Tax Rules, the decisive question is whether the particular business sold was transferred as a whole, as a running concern, and not whether the assessee ceased all other business activity. Continued ownership of other independent businesses does not by itself defeat the deduction. The Kerala HC held that the earlier contrary Division Bench view was inconsistent with the rule, and that the prospective amendment introducing Explanation 3D to section 2 did not alter the position for the relevant period. On the facts, each of the three businesses was sold separately as a going concern with assets and liabilities, so the assessee was entitled to the deduction and the Revenue's revision failed.

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Issues: Whether the amount realised on the sale of three separate businesses carried on by the assessee under common ownership and registration was deductible from taxable turnover under rule 9(g) of the Kerala General Sales Tax Rules, 1963, on the footing that there was a sale of the business as a whole.

Analysis: The expression "sale of his business as a whole" in rule 9(g) does not require complete cessation of all business activity by the assessee. The relevant enquiry is whether the particular business sold was transferred as a whole, as a running concern, with no part of that business retained by the seller. The earlier Division Bench view, which treated continued engagement in some other business as fatal to the deduction, was held to be inconsistent with the wording of the rule and the legislative purpose. The amendment introducing Explanation 3D to section 2 of the Act did not alter the position for the period in question, as it was prospective and did not remove the statutory deduction in appropriate cases. On the facts, each of the three businesses sold was a separate business, transferred as a running concern along with assets and liabilities, and none of the sold businesses was retained.

Conclusion: The assessee was entitled to the deduction under rule 9(g) in respect of the amounts realised by the sale of those businesses.

Final Conclusion: The revision failed and the turnover addition sustained by the Revenue was not interfered with, as the disputed sale did not disqualify the assessee from the statutory deduction on the facts found by the Court.

Ratio Decidendi: For purposes of the deduction for sale of business as a whole, the decisive question is whether the particular business transferred was sold as an entire going concern, and continued ownership of some other independent business does not by itself defeat the deduction.

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