PROJECTION OF INDIA PICTURES Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE dispute before us relates to the assessment of the assessee on sales effected by him in the year of assessment on two items, namely, (1) sale of a cinema projector for Rs. 1, 000 and (2) sale of the negative film of "tour of Mahatma Gandhi" sold to Gandhi Samarak Nidhi for Rs. 8, 000. THE business in which the assessee is engaged is as a dealer in cinematographic goods. It is common ground that the nature of the business activity he is engaged in involves the following transactions. He used to purchase from abroad film projectors and sell them. He used to take educational films and exhibit them for remuneration in schools and other institutions with the help of some of his projectors. THEre was a market for the positives of such films taken by him, and he used to sell the positives and retain the negatives for some years. In regard to the first item, the contention of the assessee before the assessment authorities was that the concerned film projector was purchased by him in 1946 and was used by him for several years for exhibition of educational films, which was one of the activities in which he was engaged, and then he sold it in the year of assessment. In regard to the sale of the negative film of the "tour of Mahatma Gandhi", the assessee contended that the tour was in 1946 and in that year the film was taken, that after using it for over 8 years, during which period he sold several positives of the film, he sold the negative to Gandhi Samarak Nidhi on account of the request of the latter to sell the negative to it for the purpose of preservation. As a result of the above-mentioned nature of the transactions, the assessee contended that the sales were not in the course of his business and were not assessable to sales tax. This contention was negatived both by the assessing authority as well as by the Sales Tax Appellate Tribunal. THE present revision case is filed before us disputing the above decision. THE question as to how far a particular sale is a sale in the course of business attracting the levy of sales tax is a question to be decided with reference to the circumstances of each case. It is admitted that the appellant's business is carried on with a profit-motive. He is not a mere exhibitor of educational films for cultural or educative purposes. As long as the sale of positives gave a good income he retained the negatives. But a point of time could be reached in the course of the business, when he might have found it more profitable to sell away the negative itself without retaining it any longer for taking positives and disposing of them. It is admitted by the assessee that subsequent to the sale of the "tour of Mahatma Gandhi" film, he took a film entitled "conditions in Burma" and sold away both the positive and negative.

(2.) THEREFORE, from the circumstance that he had kept the negative and sold only the positives of the film of the "tour of Mahatma Gandhi" for 8 years, and then ultimately decided to sell the negative to Gandhi Samarak nidhi, who might have been a favoured purchaser, it could not be considered that he was effecting the sale of the negative film dissociated from the general business activity in which he was engaged, whose features have been mentioned above. There was, on the other hand, reasonable connection between the two. Regarding the sale of the cinema projector, learned counsel for the assessee before us, contended that he utilised some of the projectors from his stock for the purpose of exhibiting films in educational institutions and derived profit from that activity. The projectors put to this use had been treated by the Income-tax Authorities, for the purpose of income-tax assessment, as capital goods and depreciation allowed in respect of them. When projectors thus used for the purpose of exhibition of films were subsequently sold, as in this case, the assessee contends that such sales should be dissociated from his business activity and should be exempt from sales tax. The tests to find out whether a particular transaction of sale is part of the business activity of a dealer so as to attract the levy of sales tax have been laid down in a number of decisions, both of this Court as well as of other Courts in India. In one of the earliest cases of this Court reported in Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Sri Lakshmi saraswathi Motor Service, Gudiyattam the assessee was a motor transport company engaged in the business of providing public transport. Buses used in transport as and when they became unserviceable or useless were sold either as old buses or scrap. It was held by this Court that by reason of these isolated transactions, the assessee could not be treated as dealers in buses within the meaning of the Sales Tax Act. In State of Bombay v. Ahmedabad Education Society the assessee was an education society which had as its objects the spread of education, the starting and taking over of arts colleges, and other similar objects. In furtherance of these objects, they gave a contract to a contractor for construction of buildings. They set up a brick factory and supplied bricks manufactured therein to the contractor. The remaining bricks, over and above what was required for the construction work, were disposed of to sister educational institutions at cost price. The High Court of Bombay, in the above circumstances, held that the society was not a dealer liable to pay sales tax on the sales of bricks, as there was no intention on its part to sell the goods at the time when the goods were manufactured. At page 500 of the report they observed :

(3.) IN United Bleachers Ltd. v. State of Madras this Court dealt with an assessee whose business was bleaching cloth. They sold packing materials used in the performance of their contract with their customers. At page 281 of the report, Ramachandra Iyer, J. (as he then was) observed :