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Issues: Whether the sale of intellectual property by a dealer carrying on manufacture and sale of biscuits and confectionery was liable to sales tax under the Karnataka Sales Tax Act, 1957.
Analysis: Liability under the charging provision arises only when the turnover relates to a dealer carrying on the business of buying, selling, supplying or distributing the relevant goods. "Business" requires a course of dealing with continuity, regularity and profit-motive, and a transaction will be taxable only if it is in the course of that business or is incidental or ancillary to it. A disposal of assets that are not the subject of the dealer's trading activity, and which are not bought and sold as part of the dealer's ordinary commercial operations, does not by itself attract tax. On the facts, the intellectual property comprised trademarks, designs, copyright and related rights used in the business of manufacturing biscuits and confectionery, but the assessee was not engaged in the business of trading in such intellectual property, nor was its sale shown to be incidental or ancillary to the main business.
Conclusion: The sale of the intellectual property did not attract sales tax under the Act, and the assessee was not liable to pay tax on that transaction.
Ratio Decidendi: Sales tax is attracted only where the impugned transaction is a sale of goods in the course of, or incidental or ancillary to, the dealer's own business of buying and selling those goods; a one-time sale of non-trading intellectual property used in the business is not taxable.
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