The Judgment of the Court was delivered by
Srinivasan, J.:— The assessees are building contractors. The turnover in dispute in the present revision petition is a sum of Rs. 29,274-55 nP. being the sales value of materials such as broken bricks, jelly and cement left over after the completion of building contracts executed by the assessees. The Deputy Commercial Tax Officer included a sum of Rs. 38,724 which represented the sales of the above materials as well as some other assets such as lorries, tractors etc., which had become worn out or unusable. The assessment of this turnover was taken in the appeal to the Appellate Assistant Commissioner before whom the assessees claimed that they are not dealers engaged in the buying and the selling of such articles, that these sales are only incidental to the carrying on of the contract work and that therefore the relevant turnover was not liable to sales tax. The appellate authority accepted the contention in so far as the sale of plant and machinery was concerned and deleted a sum of Rs. 6,450 in this regard. The other materials sold consisted of scaffolding poles, bricks, cement etc. The Appellate Assistant Commissioner held that such sales were not stray transactions but that they were sold periodically after any item of construction work was completed. He thought that the profit motive had to be gathered in connection with the line of business engaged in by the assessees and not with regard to each component part of that business. He concluded therefore that the turnover, excluding that which he deleted, was assessable to tax.
2. There was a further appeal to the Tribunal. The Tribunal while accepting the principles that the assessees were liable in respect of such sales, made a distinction with regard to the scaffolding materials and thought that the assessees were not dealers in so far as the sales of the scaffolding materials are concerned. In the absence, of precise details regarding the turnover in that regard the Tribunal estimated the value of these materials at Rs. 3,000 and directed its deletion. The result was that the assessment in respect of the turnover of Rs. 29,274-55 nP. was confirmed.
3. The assessees have now filed this revision petition contending that they are not dealers in the sense of buying and selling articles such as broken bricks, jelly and cement. Reliance is placed upon the decision in State Of Madras v. Gannon Dunkerley & Co., (Madras) Ltd [1958] 9 S.T.C 353. in which it was held that the assessees cannot be regarded as having a taxable turnover withing the meaning of the Madras General Sales Tax Act in so far as the materials that went into the construction of the buildings are concerned. The principle of this decision is sought to be extended even to that part of the material which was not used in the construction and which the assessee finding it superfluous disposed of by sale. It was also contended that the profit motive, which is a necessary ingredient of the carrying on of business, is absent in respect of these transactions.
4. Certain facts are not in dispute. That the assessees are building contractors and use materials for the purpose of these constructions is admitted. In so far as the value of the materials they used in such construction is concerned, in the absence of any separate agreement between the assessees and the party for whom the building was constructed establishing a separate agreement to sell materials as such, the position in law is that there would be no turnover of sales as defined in the Madras General Sales Tax Act. The question however is whether when the assessee engaged himself in a course of activity which forms a necessary corollary to his business, that is to say, when after the completion of the construction work he has on his hands certain building materials as surplus to his requirements and he disposes of them in open market, these transactions would or would not attract the levy of sales tax. The question would necessarily depend upon whether the assessee is a dealer, whether there is a sale and consequently a turnover of such sales.
5. Notwithstanding that the assessee engaged himself in the business of building contracts and that the transfer of property in the material used by him in the execution of the building contracts does not represent a sale within the meaning of the Act, there seems to be no doubt that the assessee is a dealer. “Dealer” as defined in the Act is a person who carries on the business of “buying, selling, supplying” goods directly or otherwise. It may be that the supply of goods made directly in the execution of the construction contracts by the assessee may not attract tax by reason of the further definition of sale as contained in the Act. But in so far as the definition of “dealer” is concerned, it does not appear to admit of any contradiction that the assessee would clearly come within the scope of that definition. We are unable to find anything in the decision of the Supreme Court in the Gannon Dunkerley case, which can possibly suggest that a building contractor cannot be a dealer. The principal reason why there was held to be no taxable turnover in the transfer of property in goods involved in a works contract is that, in such a case there is no sale of goods as such and that the property in the goods passed by accretion as it were to an immovable property. The contention of the assessees that the principle of this decision should be extended even to cases where the assessees sell the materials as such cannot possibly be accepted.
6. Learned counsel for the assessees contends that at the time they purchased the articles they purchased them with a view to utilise them in the works contract and that they had no intention to sell the articles. We are not concerned with the motives that initiated the purchase. We are concerned with the factum of sale and the question whether that sale of the materials as such leads to a taxable turnover.
7. Reliance was placed upon a decision of this Court in Deputy Commissioner of Commercial Taxes, Coimbatore v. Sri Lakshmi Saraswathi Motor Service, Gudiyatham. That was a case of a motor transport company which effected sales of unserviceable buses. The turnover of such sales was sought to be taxed. The learned Judges in a very short judgment held that on the facts found the motor transport company are not persons who could be described as “dealers” as defined in the Act, for they never carried on the business of buying or selling buses. Since their business was only the business of providing transport, isolated transactions of sales of unserviceable buses could not be treated as sales by dealers in buses. This decision has really no application to the facts of the present case for here it cannot be denied and we do not understand the learned counsel for the petitioner to deny that the assessees do come within the scope of the definition of “dealer”. The transport company in that case was not a dealer in the sense that it was supplying goods directly or otherwise for any purpose whatsoever. If it was not a dealer the further conclusion naturally followed. This decision to our mind has very little application.
8. In State of Mysore v. Bangalore Woollen, Cotton and Silk Mills Co., Ltd. [1962] 13 S.T.C 106., the assesssee was a textile mill. It sold some unserviceable goods like waste cotton, useless ropes, scrap iron, worn out and broken parts of machinery etc. The sale of these items was held not liable to taxation. The learned Judges purported to distinguish a decision of the Bombay High Court in Aryodaya Spinning and Weaving Co. Ltd. v. Stale of Bombay [1960] 11 S.T.C 141., on the ground that in that decision the assessee which carried on the business of manufacturing cotton textile and yarn had sought for registration as dealers “carrying on the business of selling yarn, cloth, cotton, cotton waste, stores, etc.” The fact that they were so registered as dealers in selling cotton and cotton waste, in the opinion of the learned Judges of the Mysore High Court, made a difference. In the case which they had before them there was no such registration as a dealer for carrying on the business of selling waste cotton etc., and in that view they concluded that that part of the turnover could not be brought to tax. With great respect it seems to us to make very little difference whether a person was registered in any particular manner; the question is: Is he a dealer within the meaning of the Act? and if he is, though he might have registered himself as a dealer engaging himself in the sale of a particular commodity, if the sale of any other commodity is a necessary part of the business he engages himself in, he would, to our minds, be undoubtedly a dealer therein. The decision of the Mysore High Court was considered in a later decision of the Bombay High Court in A. Ebrahim and Company v. State of Bombay, among other cases, and the learned Judges observed that the question to be considered in a case of this kind was whether the sale in question was a business activity carried on by the assessee, that is to say, whether the sale had any reasonable connection with the normal course of business of the assessee and whether the intention of the assessee was to effect that sale in the course of that business. Reverting to their earlier decision in Aryodaya Spinning and Weaving Co. Ltd. v. State of Bombay, they observed that where a subsidiary product resulted from the normal business carried on by the assessee, an intention to carry on the business of selling the subsidiary product as a part or incident of the business of the assessee could be readily inferred and that the transaction could be regarded as an activity in the course of the business of the assessee.
9. It seems to us that in these circumstances when the assessee is undoubtedly a dealer and the necessity of disposal of the surplus material is ingrained in the very nature of the business which the assessee carries on and he has to effect sales of such surplus material, there is no reason why he cannot be regarded as a dealer selling goods in the course of his business.
10. The further argument that there can be no profit motive fails to impress us. It is true that an independent profit motive in so far as these transactions are concerned cannot be said to exist. But it is not necessary to discern the profit motive in respect of each and every part of the business carried on by a dealer. In a decision of this Court in United Bleachers Ltd. v. State of Madras, it has been held that the profit motive necessary to be examined is one which embraces the whole business of the assessee and not in respect of each one of the component parts of the business. Whether a particular sale resulted in a profit or a loss is not the matter for consideration. It is whether a course of business activity is or is not intended to be engaged in with the profit motive.
11. The contentions advanced by the assessee accordingly fail. The revision petition is dismissed with costs. Counsel's fee Rs. 100.
12. Petition dismissed.