Forest bamboo lease treated as profit a prendre, not a completed sale of goods, so sales tax did not apply.

A forest lease for bamboo did not amount to a completed sale of goods under the Andhra Pradesh General Sales Tax Act, 1957 because the bamboo was not identified, ascertained, or in a deliverable state at the time of the agreement, and further conditions such as silvicultural work, weighment, permits, extraction charges, and removal restrictions had to be satisfied before property could pass. The same integrated arrangement also covered departmentally extracted bamboo, so severance occurred before, and not under, any contract of sale. The agreement was instead a profit a prendre, conferring an indivisible right to enter forest land and take natural produce as a benefit arising out of land. As such, the amounts payable were not turnover of goods and were outside sales tax treatment.

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Issues: (i) Whether the bamboo transactions under the lease agreement amounted to a sale of goods exigible to tax under the Andhra Pradesh General Sales Tax Act, 1957, including the departmentally extracted bamboos; (ii) Whether the agreement was a grant of a profit a prendre and therefore an interest in immovable property outside the State's taxing power under Entry 54 of List II.

Issue (i): Whether the bamboo transactions under the lease agreement amounted to a sale of goods exigible to tax under the Andhra Pradesh General Sales Tax Act, 1957, including the departmentally extracted bamboos.

Analysis: Tax under the Andhra Pradesh General Sales Tax Act, 1957 is attracted only when there is a completed transfer of property in goods. The agreement, read as a whole, showed that the bamboo was not identified, ascertained, or in a deliverable state on the date of contract. The lessee was required to perform silvicultural operations, work only in allotted coupes, obtain weighment and permits, and comply with further conditions before removal. Even the departmentally extracted bamboo was supplied under the same integrated arrangement and was subject to delivery, extraction charges, selling price, penalties, and other conditions. The severance of bamboo therefore occurred prior to, and not under, a contract of sale, and the property did not pass at the time of the agreement.

Conclusion: The bamboo transactions did not constitute a taxable sale or purchase of goods under the Act.

Issue (ii): Whether the agreement was a grant of a profit a prendre and therefore an interest in immovable property outside the State's taxing power under Entry 54 of List II.

Analysis: The agreement conferred on the lessee a right to enter the forest land and take the natural produce of the soil, together with ancillary rights necessary for extraction, supervision, storage, transport, and silvicultural work. Such a right is a benefit arising out of land and is an interest in immovable property. The contract was integral and indivisible and could not be split into separate sale and non-sale components. As the subject matter was a profit a prendre, the State could not treat the amounts payable under the agreement as turnover of goods for tax purposes.

Conclusion: The agreement was a grant of a profit a prendre and not a sale of goods exigible to tax.

Final Conclusion: The revisions were not maintainable on the assessees' challenge to taxation, and the Tribunal's view that the agreement was outside the ambit of sales tax was not accepted.

Ratio Decidendi: A forest lease conferring an indivisible right to enter land, extract growing bamboo under restrictive conditions, and take the produce as part of a benefit arising out of land is a profit a prendre and not a completed sale of goods liable to sales tax.

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