Transfer of isolated assets and share allotment as consideration can still amount to taxable sale under sales tax rules.

Rule 6(d) of the Tamil Nadu General Sales Tax Rules applies only to a transfer of the business as a going concern, not to the transfer of isolated fixed assets. Because the transfer covered only specified plant, machinery and other assets of a newly floated subsidiary, it did not qualify for deduction and the deduction was wrongly granted. Allotment of shares as consideration for the transfer of goods was treated as valuable consideration, since the reciprocal exchange operated like cash. The turnover was therefore taxable, and deletion by the Tribunal was unsustainable.

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Issues: (i) Whether transfer of only fixed assets to a newly floated subsidiary could be treated as a sale of the business as a whole so as to attract deduction under rule 6(d) of the Tamil Nadu General Sales Tax Rules. (ii) Whether allotment of shares in consideration of the transfer of plant, machinery and other assets constituted sale for valuable consideration.

Issue (i): Whether transfer of only fixed assets to a newly floated subsidiary could be treated as a sale of the business as a whole so as to attract deduction under rule 6(d) of the Tamil Nadu General Sales Tax Rules.

Analysis: Rule 6(d) permits deduction only where there is a sale of the business as a whole. The transfer in question covered only specified fixed assets and not the entire business or its assets and liabilities, and therefore did not answer the description of a transfer of the business as a going concern. The rule could not be extended to a mere transfer of assets.

Conclusion: The transfer did not fall within rule 6(d) and the deduction was wrongly granted.

Issue (ii): Whether allotment of shares in consideration of the transfer of plant, machinery and other assets constituted sale for valuable consideration.

Analysis: The consideration was not confined to cash, but consisted of shares allotted in exchange for the assets transferred. Such reciprocal entries amounted to cancellation of one debt by another and the consideration was akin to cash, satisfying the requirement of valuable consideration for a sale.

Conclusion: The transaction amounted to a sale for valuable consideration.

Final Conclusion: The turnover was taxable, the Tribunal's deletion was unsustainable, and the revision was allowed.

Ratio Decidendi: Rule 6(d) applies only to a transfer of the business as a going concern, not to a transfer of isolated assets, and allotment of shares may constitute valuable consideration where it is the agreed quid pro quo for the transfer of goods.

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