Sale of an entire business undertaking as a going concern was not taxable as business turnover under sales tax law.

Transfer of an entire business undertaking or a closed division as a going concern for a lump sum consideration was not treated as a sale in the course of business under the Andhra Pradesh General Sales Tax Act, 1957. The charging provision applied only to transactions by a dealer carried on in the course of buying, selling or otherwise dealing in goods, and the inclusive definition of business did not extend to a complete disposal that amounted to winding up or closing that unit. The continued operation of another line of business did not make the closure of one independent unit incidental or ancillary to the ongoing business, and the absence of frequency, continuity and regularity reinforced the non-taxable character.

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Issues: Whether the transfer of an entire business undertaking or a closed division as a going concern for a lump sum consideration constituted a sale in the course of business and attracted sales tax under the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: The relevant charging framework required a transfer of property in goods to be in the course of trade or business, and liability attached only to a dealer carrying on the business of buying, selling or otherwise dealing in goods. The inclusive definition of business could take within its fold transactions connected with, incidental to, or ancillary to an ongoing trade or manufacture, but not a transaction whose true character was the complete disposal and cessation of an undertaking. A sale of a business unit as a going concern, with its movable and immovable assets, licences, goodwill, contracts and employees, was found to be a step in winding up or closing that unit rather than a trading transaction in goods. The fact that the parent company continued another line of business did not make the closure of one independent unit an incidental or ancillary transaction of the continuing business, and the absence of frequency, continuity and regularity reinforced that conclusion. Reliance placed on the turnover provisions and the rule relating to sale of goodwill could not expand the charging provision so as to tax a transaction that did not otherwise fall within the Act.

Conclusion: The transfer of the entire undertaking or division as a going concern was not a sale in the course of business and was not exigible to tax under the Act; the challenge by the assessee succeeded on this issue.

Ratio Decidendi: Disposal of an entire business undertaking or an independent division as a going concern, effected to close down that unit, is not an incidental or ancillary transaction in the course of business and therefore does not constitute taxable turnover under the sales tax charging provision.

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