DEPUTY COMMISSIONER OF AGRICULTURAL INCOME-TAX AND SALES TAX LAW ERNAKULAM Vs. TIRUMBADI RUBBER COMPANY LTD

JUDGEMENT

(1.) THESE tax revision cases can be grouped under two heads, those taken by the revenue and those filed by the two assessees, Tirumbadi Rubber Company, Coimbatore, and M/s. Cochin Malabar Estates Ltd. , Coimbatore. The tax revision cases taken by the revenue are 5, 6, 7, 8, 9, 10, 11, 14, 15 and 16 of 1974 and those by the two assessees are 12, 13, 18, 19, 20, 21 and 22 of 1974. THESE cases relate to the assessment years 1962-63 to 1965-66.

(2.) THE question raised by the revenue is that the Tribunal erred in exonerating from tax the turnover pertaining to fallen rubber trees, twigs, empty barrels, scrap and so forth. We shall first deal with the batch of cases wherein this question has been raised. THE relevant parts of the Tribunal's order pertaining to this aspect reads as follows : " THE turnover assessed in the years under appeal admittedly represented sale proceeds of fallen rubber trees, twigs, empty barrels, scrap, etc. Of these it is not clear whether the scrap is scrap rubber. If what is sold is scrap rubber we feel that the turnover of such scrap is assessable in the hands of the appellant-company as it is one of the products dealt in by them. But the fallen trees, twigs, empty barrels and such other items are unserviceable goods as far as the business of the company is concerned and an attempt on their part to realise a price by sale of such goods does not necessarily lead to an inference that they intended to carry on business in these goods. THErefore, applying the dictum laid down by the Supreme Court in State of Gujarat v. Raipur Manufacturing Co. Ltd. ([1967] 19 S. T. C. 1 (S. C.)), we find that the turnover in question as stated above for the different years are not liable to tax in the hands of the appellant-company, subject of course excluding the part, if any, relating to sales of scrap rubber. We may also state here that the rubber trees are fixed assets of the company and we find no provision in the Kerala General Sales Tax Act, 1963, to bring to tax the sale price of a part or whole of the fixed assets of the assessee. This point will be elaborately considered while dealing with the question of assessability or otherwise of the amounts received by the company towards sale value of rubber trees during the year 1964-65. " THE third contention raised on behalf of the appellant-company is regarding the inclusion of the sale value of old rubber trees in the taxable turnover for 1964-65. During the year the company received a sum of Rs. 1,27,597. 95 towards the sale value of old rubber trees. According to the learned Advocate, the above amount is not taxable. In the first place, he contends that the company is not a dealer in rubber trees. He relies on the decision of the Supreme Court reported in State of Gujarat v. Raipur Manufacturing Co. Ltd. ([1967] 19 S. T. C. 1 (S. C.)), in support of his contention. When the rubber trees were planted long ago it was not the intention of the company to cut and sell them on any particular date. When the trees became old and uneconomic they had to be removed and the area replanted with new rubber plants. From these circumstances, it is contended that an intention on the part of the assessee-company to do business in the sale of rubber trees cannot be spelt and that therefore the amounts realised by the company towards value of rubber trees allowed to be removed with roots from the estate cannot be treated as turnover liable to tax under the Act. Alternatively, it is also contended that rubber tree is not timber and that hence explanation 1 to section 2 (xxvii) of the Kerala General Sales Tax Act will not be attracted in regard to the transactions in question. Still another alternate contention is that the rubber trees sold to the various parties as per the agreements to cut and remove with roots form part of the land and hence only a part of the fixed assets of the company. Hence according to him the sales are not exigible to tax under the Kerala General Sales Tax Act, 1963. THE goods sold are old and uneconomic rubber trees and they are admittedly part of the fixed assets of the appellant-company. It is also a fact that the sales of these trees are only once in their lifetime, viz. , when they become old, unserviceable and uneconomic. We are unable to hold that in disposing of such old and uneconomic trees, the company was carrying on business of selling such trees. THEre sales were frequent and the volume was large but it cannot be presumed that when the trees were planted there was an intention to carry on the business of sales of these trees nor are these trees by-products or subsidiary products arising in the course of the business of the company. THE trees are part of the fixed assets of the company. THEy are of course sold by the company for a price which goes into the profit and loss account of the business and may indirectly reduce the cost of production of the items dealt in by the company, but on that account, it cannot be said to become part of the business of selling latex and other products produced by the company. In order that receipts from sale of a commodity may be included in the taxable turnover, it must be established that the assessee was carrying on business in that particular commodity and to prove that fact it must be established that the assessee had an intention to carry on business in that commodity. A person who sells goods which are old, uneconomic, unserviceable and unsuitable for his business, does not on that account become a dealer in those goods, unless he had an intention to carry on the business of selling those goods. Hence we find that the appellant-company cannot be assessed on the sale value of the rubber trees for the year 1964-65 on both counts, viz. , that the appellant-company is not a dealer in rubber trees and that the trees are part of their fixed assets. In view of our above finding, we do not find it necessary to go into the question whether rubber trees are timber. "

(3.) IT may be noted that the definition of the term "dealer" in section 2 (viii) in the Kerala General Sales Tax Act, 1963, included a casual trader and a casual trader took within its ambit a person who has occasional transactions of a business nature involving the buying, selling, supply or distribution of goods in the State.