Dominant intention test governs classification of serial production contracts; copyright clause does not defeat sale of goods treatment.

A composite agreement for producing a television serial was characterised by the dominant intention test, under which the court examined the contract as a whole and the substance of the transaction. Because the assessee had to conceive, script, shoot, direct, produce, edit and complete the serial, and the finished serial and materials became the Government's property on delivery, the arrangement was treated as production of a marketable tangible product with transfer of ownership on completion. The copyright clause under Section 17(b) of the Copyright Act concerned intellectual property only and did not alter ownership of the physical article. The transaction was therefore a sale of goods, not a contract of service or work and labour.

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Issues: Whether the agreement for production of a television serial and transfer of the serial and related materials constituted a contract of sale of goods or a contract for work and labour, and whether the vesting of copyright in the Government under the copyright clause altered that character.

Analysis: The decisive test was the dominant intention of the parties as gathered from the agreement as a whole. The assessee was obliged to conceive, script, shoot, direct, produce, edit and complete the serial, and the finished serial and materials were to become the Government's absolute property only on delivery. The arrangement therefore involved production of a marketable film/serial in material form, with the transfer of property occurring upon completion and delivery. The copyright clause under Section 17(b) of the Copyright Act, 1957 concerned intellectual property and did not govern transfer of ownership in the tangible product. The distinction between copyright and ownership of the physical article was material, and the deemed first ownership of copyright did not convert the transaction into a mere service contract.

Conclusion: The transaction was a sale of goods and not a contract of service or work and labour; the assessee's contention failed and the assessment order was restored.

Ratio Decidendi: In determining whether a composite agreement is a sale or a works contract, the court must apply the dominant intention test and the substance of the transaction; a copyright clause does not by itself negate transfer of ownership in the finished tangible product.

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