1964 (11) TMI 94

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....ners, carried on business at two places, namely, Vasad in Kaira District and Padra in Baroda District. The business at Vasad was carried on in the name of Messrs. Tamakuwala & Sons, and that at Padra was carried on in the name of Messrs. Trikamlal Nagardas Tamakuwala. The respondent-firm was a registered dealer under the provisions of the Act and was liable to pay tax on sales effected by it in the course of its business. On 3rd April, 1954, the respondent-firm was dissolved and under an arrangement arrived at between the partners, the business of the respondent-firm at Padra was taken over by three of the partners while the business at Vasad was taken over by the remaining two partners in partnership with two other persons. This latter par....

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....siness from the business at Padra and since the ownership of the business from the business at Vasad was entirely transferred by the respondent-firm to Messrs. Gokalbhai Tribhovandas & Co., the case was covered by section 26(1) and the stock of goods transferred to Messrs. Gokalbhai Tribhovandas & Co. along with the Vasad business was not liable to be included in the turnover of sales of the respondent-firm. Now it is difficult to see why reliance was placed by the respondent-firm on section 26(1). The Revenue sought to tax the stock of goods transferred to Messrs. Gokalbhai Tribhovandas & Co. under section 26(2) and the only argument which could therefore be profitably advanced before the Assistant Commissioner of Sales Tax was that sectio....

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.... and the respondent-firm thereupon preferred a further revision application to the Tribunal. Before the Tribunal, the view of the revenue authorities that the case fell within section 26(2) was challenged on behalf of the respondent-firm and the challenge was upheld by the Tribunal. The Tribunal took the view that on a true construction of section 26(2), what was required for the applicability of the section was that the transferor should transfer the ownership of a part of his business to the transferee and the other part of the business should remain with the transferor and it is only in such a case that the transferor would be liable to pay tax in respect of the stock of goods transferred to the transferee as if the goods had been sol....

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..... should be taxed under that provision. This argument was also negatived by the Tribunal and two grounds were given by the Tribunal in support of their view. The first ground was that it was not open to the Revenue at the stage of the revision application before the Tribunal to change the basis of assessment from section 26(2) to section 26(3)(i) and the second ground was that, in any event, the machinery of assessment prescribed by section 14 was not available in cases covered by section 26(3)(i). The State, being aggrieved by this decision of the Tribunal, made an application for a reference and on the application, the following three questions were referred for the opinion of this Court: "1. Whether on the facts and in the circumstanc....

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.... to the first question which deals with the applicability of section 26(2) to the facts of the present case. The determination of that question turns on the interpretation of section 26(2). Section 26(2), as it stood at the material time, was in the following terms: "26. (2) When a dealer liable to pay the tax transfers the ownership of a part of his business the transferor shall be liable to pay the tax in respect of the stock of goods transferred along with that part of his business, which is not so transferred, as if the goods have been sold by him, unless the transferee holds a certificate of registration or obtains it within the prescribed period."   It is clear on a plain grammatical construction of the language of the sect....

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.... the second condition was satisfied. It was the fulfilment of this second condition which was disputed on behalf of the respondent-firm. Now it is difficult to see how the second condition could be said to have been fulfilled in the present case. The finding of fact reached by the Tribunal was that on the dissolution of the respondent-firm on 3rd April, 1954, the arrangement arrived at between the parties was that the business at Padra should be taken over by three of the partners, the other two partners not having any interest in the said business, while the business at Vasad should be taken over by the other two partners in partnership with two others, the first three partners not having any interest in the said business. It is clear from....