Taxability of used business assets and tax-paid chassis turns on incidental sale and identifiable component valuation.

Sale of a used truck by a forest contractor was treated as incidental to business, so the resale proceeds were taxable under the charging provision. The court applied the settled principle that disposal of a business asset after use remains connected with the business, and the assessee could not avoid tax merely because its main activity was forest contracting. However, the motor chassis purchased from a registered dealer retained its tax-paid identity under section 2(r)(ii), and the wooden body could be separately valued. Exemption was therefore allowed for the chassis, with only the body value, after depreciation, included in taxable turnover.

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Issues: (i) whether the sale proceeds of a used truck sold by a forest contractor were liable to sales tax as a sale incidental to business; (ii) whether exemption under section 2(r)(ii) was available in respect of the motor chassis purchased from a registered dealer and whether the value of the chassis and wooden body could be bifurcated for tax purposes.

Issue (i): whether the sale proceeds of a used truck sold by a forest contractor were liable to sales tax as a sale incidental to business.

Analysis: The truck had been purchased for business use and later sold after being used for about three years. Applying the settled principle that sales of business assets, when disposed of after use, are incidental to and connected with the business, the sale did not escape the charging provision merely because the assessee was principally engaged in forest contracting. The earlier decisions treating such disposals as taxable were followed.

Conclusion: The sale proceeds of the used truck were liable to sales tax and this issue was decided against the assessee.

Issue (ii): whether exemption under section 2(r)(ii) was available in respect of the motor chassis purchased from a registered dealer and whether the value of the chassis and wooden body could be bifurcated for tax purposes.

Analysis: The chassis was purchased from a registered dealer and sales tax had already been paid on it. The wooden body was subsequently fixed to the chassis and could be separately identified and valued. The court treated the chassis as tax-paid goods within the meaning of section 2(r)(ii) and held that the resale of the truck did not destroy the identity of the chassis. Only the cost attributable to the wooden body, subject to depreciation, could be included in the taxable turnover.

Conclusion: Exemption under section 2(r)(ii) was available on the value of the motor chassis and the value of the body could be bifurcated; this issue was decided in favour of the assessee.

Final Conclusion: The reference was answered by holding that the resale of the used truck was taxable as part of the assessee's business turnover, but the chassis portion was entitled to deduction as tax-paid goods, with only the value of the wooden body remaining taxable.

Ratio Decidendi: A business asset sold after use may be taxable as a sale incidental to business, but where a tax-paid component retains its identity, exemption cannot be denied merely because a separately detachable addition has been made; the taxable value may be restricted to the non-exempt component.

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