AI Drafter 
TaxTMI 
TaxTMI 
2013 (12) TMI 629
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to M/s.Greaves Limited under Business Transfer Agreement dated 15.12.1993 ? 2. Whether the Hon'ble Sales Tax Appellate Tribunal committed an error of law in applying the erroneous, legal test of requiring transfer of all businesses of an assessee as the only circumstance in which there could be exemption under Explanation 3 to Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959 ? 3. Whether the Hon'ble Sales Tax Appellate Tribunal committed an error of law in emphasizing on the retention of a small part of the assets in the course of business succession, while failing to apply the correct legal test, which was to determine whether the retention of the small part of the assets was to continue in the same line of business or was being retained so as not to burden the Transferee of the business?" 2. The assessment year under consideration is 1993-94. We find from the facts narrated that the assessee carried on business in Agro Engine, Light Engineering Components, in Power Genset as well as in two-wheeler. The assessee had factories at Ranipet and Thoraipakkam as well as at Thiruvotriyur. While the Agro Engine business, Light Engineering Components business were carri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of treating the sales of movable properties as exempt under the provisions of the Tamil Nadu General Sales Tax Act did not apply. The reliance placed on by the assessee in the decision reported in (1977) 39 STC 325 (Mad) in the case of Deputy Commissioner Vs. K.Behanan Thomas was also rejected by the Assessing Officer. In the process, while including the said turnover, the Assessing Officer also levied penalty under Section 12(3)(b) of the TNGST Act. 6. Aggrieved by the demand, the assessee went on appeal before the Appellate Deputy Commissioner (CT) Appeals. The assessee contented that by reason of Explanation 3 to Section 2(r) of the TNGST Act, the sale of business, viz., the Ranipet Unit and Thoraipakkam Unit being the wholesome sale, there was no question of inclusion of the sale consideration as part of the turnover. The assessee further pointed out that the separate indication of the price for the land and the materials included those goods and machinery in progress, per se, would not result in negating the right of the assessee for exemption. The assessee pointed out that as per Clause 2(b) of the agreement, it was for a composite price, as such, the assets were to be tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity also confirmed the penalty. 11. Aggrieved by this, the assessee went on appeal before the Sales Tax Appellate Tribunal, where the assessee reiterated the contentions taken before the authorities below viz., the Assessing Officer as well as the Deputy Commissioner (CT) Appeals. The assessee further contended before the Sales Tax Appellate Tribunal that the authorities below had taken the erroneous view as regards the terms of the contract as well as on the provisions of law and not applied the law laid down in the decision reported in 39 STC 325 (Deputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas). 12. The Sales Tax Appellate Tribunal, however, rejected the contention of the assessee based on the decision reported in 7 STC 720 (1956) in the case of Tools and Machineries Ltd., Vs. State of Madras and thus, upheld the order of assessment. Aggrieved by this, the present Tax Case (Revision) is preferred by the assessee. 13. Learned counsel appearing for the assessee took us through the decisions reported in 39 STC 325 (Deputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas), 51 STC 278 (Monsanto Chemicals of India (P) Ltd Vs. State of Tamil Nadu ), 112 STC 01 (C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n as a part of the turnover, consequently, the question of denying the exemption to the assessee did not arise. This Court pointed out that the sale of stock-in-trade for the purposes of closing down the business is different from the sale of the business as a whole as running concern; the sale of the business, lock, stock and barrel, was not incidental or ancillary to the carrying on of a business so as to be taxable under the Act. Thus, this Court held that the transaction in question would not fall within the scope of the Act at all, consequently, the sale proceeds would not form part of the turnover as defined under the Act. This Court further pointed out that when there was a transfer of the business as a whole or as a going concern, in both the cases, there would be transfers of certain materials. However, when it is a composite sale, the question of bifurcating certain turnover as related to the goods sold for the purposes of assessability did not arise. Pointing out to the distinction arising in the case reported in (1977) 39 S.T.C. 317 in the case of State of Tamil Nadu Vs Thermo Electrics, this Court pointed out that where the assessee retained certain assets and continue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....18. Keeping the law declared by this Court reported in 39 STC 325 in the case of Deputy Commissioner (C.T.) Coimbatore Vs. K.Behanan Thomas in this background and looking into the facts and the contract entered into between the parties, it is clear that the contemplation of the parties herein was the transfer of two units engaged in the manufacture of Genset, Agro Engine, Light Engineering components. The assessee was having business in Light Engineering Components at Ranipet; Genset and Agro-Engine were manufactured at Thoraipakkam. The Agreement entered into between the parties dated 15.12.1993 pointed out that the assessee had agreed to sell and transfer and sale the entire business undertaking at Ranipet, which included the leasehold land, buildings, furnitures, fixtures, office equipment and existing infrastructure etc, Machinery and equipment as specified in Schedule A3 and A4 situate therein. The agreement pertaining to the running business viz., Light Engineering components, contemplates the sale of entire business including drawings, designs etc therefor, Mitsubishi Engines/Household Generator sets; all Toolings, fixtures, gauges, instruments, moulds and dies. Clause - 1 o....