Inter-unit transfer within the same company is not a taxable sale when no transfer to another person for consideration exists.

Transfer of cotton and cotton yarn between two units of the same company, though holding separate TIN numbers, was not a sale under the Tamil Nadu Value Added Tax Act, 2006 because sale requires transfer of property in goods from one person to another for consideration, and that element was absent. Separate registration did not make the units distinct legal entities, and inter-unit movement within the same corporate personality could not be taxed as a sale. The goods were used in manufacture of exempted cloth, and the reasoning on branch transfer and common legal personality supported the view that the taxability finding was untenable.

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Issues: Whether transfer of cotton and cotton yarn between two units of the same company, each having separate TIN numbers, could be treated as a sale liable to tax under the Tamil Nadu Value Added Tax Act, 2006.

Analysis: The registration certificates of both units showed that they were units of the same company. Separate registration or separate TIN numbers did not by itself make the units distinct legal entities capable of transferring property in goods to each other. Sale under Section 2(33) of the Tamil Nadu Value Added Tax Act, 2006 requires transfer of property in goods from one person to another in the course of business for consideration, and that basic element was absent. The transfer was from one unit to another unit of the same corporate entity, and the goods were used in manufacture of exempted cloth. The reasoning in the cited decisions on branch transfer and common legal personality supported this view.

Conclusion: The inter-unit transfer was not a sale and the treating of the two units as separate legal entities for tax purposes was untenable. The finding of taxability was therefore set aside in favour of the assessee.

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