TaxTMI 
TaxTMI 
1993 (1) TMI 257
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....the value of Rs. 96,460 on the ground that some of the partners had brought it as their capital contribution. Groundnut seeds were their agricultural produce. On scrutiny, the Assistant Commissioner of Sales Tax exercised the suo motu power of revision under section 67 of the Gujarat Sales Tax Act, 1969 and issued notice to the opponent-firm on December 14, 1978, calling upon it to show cause as to why on the said amount of Rs. 96,460 purchase tax should not be levied. After hearing the opponentfirm and considering the contentions raised by the opponent-firm, he levied purchase tax on the groundnut seeds purchased by the opponent-firm from its four partners. It was held that the said produce was purchased from the unregistered dealers. He considered the fact that, out of five partners, four partners have brought groundnut seeds of different value; there was nothing on record to show that when they brought groundnut seeds the opponent-firm was in need of any capital amount, the opponent-firm was doing the business at the relevant time; the opponent-firm has purchased groundnut seeds from the four partners as if it was purchasing from other persons by paying its market price; in the ....
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....ited in the purchase account in the books of accounts of the opponent-firm; therefore, the transaction should be regarded as one of the purchases of groundnuts. The Tribunal, after considering the contentions raised by the parties held that, in accordance with the condition in the partnership deed, groundnut seeds were delivered to the opponent-firm and hence the transaction cannot be regarded as transaction of purchase made by the opponent-firm. The Tribunal came to the conclusion that the transaction of groundnut seeds of the value of Rs. 96,460 could not be regarded as purchase of groundnut seeds made by the opponent-firm and for this purpose the Tribunal relied upon the decision of the Supreme Court in the case of Hind Construction Ltd. [1972] 83 ITR 211. Being aggrieved by the judgment and order passed by the Tribunal, the State Government has preferred an application for reference and the Tribunal has referred the aforesaid question for our decision. At the time of hearing of the reference, on behalf of the applicant, the learned Assistant Government Pleader submitted that, for the purposes of the Sales Tax Act, the partnership firm is a different entity; that, according t....
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....section 30A; (28) 'sale' means a sale of goods made within the State, for cash or deferred payment or other valuable consideration, and includes any supply by a society or club or an association to its members on payment of a price or of fees or subscription, but does not include a mortgage, hypothecation, charge or pledge, and the words 'sell', 'buy' and 'purchase' with all their grammatical variations and cognate expressions, shall be construed accordingly. " (Emphasis* supplied) Then the next relevant provision for our purpose is section 15 of the Gujarat Sales Tax Act, 1969, which is as under: "15. Where a dealer who is liable to pay tax under this Act purchases any goods specified in Schedule II or III from a person who is not a registered dealer then, unless the goods so purchased are resold by the dealer, there shall be levied subject to the provisions of section 9- (i) in the case of goods specified in Schedule II, a purchase tax on the turnover of such purchases at the rate set out against them in that Schedule, and *Here italicised. (ii) in the case of goods specified in Schedule III, a purchase tax on the turnover of such purchases at a rate equival....
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.... reason for holding that when the goods are purchased by a partnership firm from its partners it is not required to pay purchase tax. Learned Advocate Mr. Pathak submitted that the dealer, which is a firm, in law cannot contract to purchase any goods from its partners. There are no two different contracting parties. In our view, this submission is totally misconceived. Under the Indian Partnership Act or under any other statute, there is no prohibition that the partnership firm cannot enter into a contract of purchase or sale of any goods with its partners. It is always open to a partner to purchase or sell the goods to the firm of which he is a partner. The partner of the firm is not required to go to another dealer for sale of his goods or for purchase of goods which he requires when the firm deals in those goods. Further, for the purposes of the Sales Tax Act, the partnership firm is separate entity from its partners. In the case of Commissioner of Income-tax v. W.L. Dahanukar [1959] 36 ITR 459, the Division Bench of the Bombay High Court (consisting of S.T. Desai and K.T. Desai, JJ., as they then were), had dealt with the similar contention in the context of the Income-ta....
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....connection reference may be made to a passage in the judgment of Sir John Beaumont in B.M. Goculdas v. Alembic Chemical Works Co. Ltd. [1948] 2 MLJ 237; 75 IA 147, where he said: "The Indian Partnership Act goes further than the English Partnership Act of 1890 in recognising that a firm may possess a personality distinct from the persons constituting it; the law in India in that respect being more in accordance with the law of Scotland than with that of England.' We are however relieved of this necessity by reason of the explanation to section 2(b) of the General Sales Tax Act, which runs: 'A co-operative society, a club, a firm, or any association which sells goods to its members is a dealer within the meaning of this clause.' It follows that a transfer of the property in goods by a member of a firm to the firm is a sale within the meaning of the General Sales Tax Act." (Emphasis* supplied) For the purposes of the Gujarat Sales Tax Act, the partnership firm is a distinct entity. The question as to whether the partnership firm can be a distinct entity for the purposes of the Sales Tax Act was considered by the Supreme Court in the case of State of Punjab V. Jullu....
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....overnment or any local authority and also any society, club or other association of persons which buys goods from or sells goods to its members or to other persons. Not only this, but it is also specifically provided that "person" includes any company or association or body of individuals, whether incorporated or not, a society, club or other institution and also a Hindu undivided family, a firm, a local authority, Central Government or a State Government. Therefore, for the purposes of the Gujarat Sales Tax Act, 1969, the partnership firm would be a legal entity. Mr. Pathak, learned advocate appearing on behalf of the opponent-firm, however, having relied on the following observations of the Supreme Court in the case of Commissioner of Income-tax v. Hind Construction Ltd. [1972] 83 ITR 211: "A sale contemplates a seller and a purchaser. If a person revalues his goods and shows a higher value for them in his books, he cannot be considered as having sold these goods and made profits therefrom. Nor can a person by handing over his goods to a partnership of which he is a partner and that as his share of capital be considered as having sold the goods to the partnership." In ou....
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....old. The stock was divided between the assessee and M/s. Patel Engineering Co. Ltd. The assessee received machinery valued at Rs. 2,06,372 as its share. Thereafter, they formed a new partnership firm known as Hind Patel Company in which each had an eight annas share. The machinery was brought in the new partnership firm as stock towards share capital and in that context the Supreme Court held that there was no sale either at the time when the assessee mentioned inflated price of the machinery which fell to its share at the time of the division or when the machinery was used as the capital of the new firm of which it was a partner. Hence, in our view, the aforesaid decision would not have any bearing in deciding the question as to whether the partnership firm, which is a different entity, can be a purchaser of goods from its partners who are unregistered dealers. Learned advocate Mr. Pathak further submitted that the aforesaid decision in the case of Hind Construction Ltd. [1972] 83 ITR 211 (SC) is approved by the Supreme Court in the case of Sunil Siddharthbhai v. Commissioner of Incometax [1985] 156 ITR 509; AIR 1986 SC 368. In that case the court observed that in the case o....