COMMISSIONER OF SALES TAX Vs. REGAL HOTEL

JUDGEMENT

(1.) This is a reference at the instance of the Commissioner of Sales Tax under section 34(1) of the Bombay Sales Tax Act, 1953 (hereinafter referred to as "the said Act").

(2.) The facts on which reference arises are as follows : Two persons D. C. Davierwalla and P. B. Boywalla, as the owners of the business of M/s. Regal Parsi Hotel, carried on this business in certain premises near Dhobi Talao which they had taken on lease. On 31st August, 1953, by an agreement in writing Davierwalla and Boywalla permitted one M. H. Bharucha to run the said hotel for a period of three years in the first instance with an option to Bharucha to renew the agreement for a further period of two years. Since several of the arguments in the matter turn on the construction of this agreement, we shall deal with the provisions of this agreement in some detail a little later. On 2nd September, 1968, the agreement came to an end and Davierwalla and Boywalla again started conducting the business of the said hotel in those premises. During the time that Bharucha was in the management of the said hotel, he incurred certain sales tax liabilities and he was assessed to pay sales tax in November, 1958. The sales tax department has contended that Davierwalla and Boywalla are liable to pay this amount as the transferees of the business under the provisions of section 26(1) of the said Act. The contention of Davierwalla and Boywalla, the owners of the respondents, was that there was no transfer at all as contemplated under section 26(1) of the said Act and they were, therefore, not liable to pay the dues of Bharucha. This contention has been accepted by the Tribunal. The question referred to us for our consideration is as follows :

(3.) Section 26(1) of the said Act seeks to make the transferee liable for payment of the tax payable by the transferor. The provisions thereof expressly provide that this liability is incurred by the transferee when the ownership of the business of a transferor-dealer liable to pay the tax is entirely transferred to the transferee. It is, therefore, beyond dispute in this case before us, and it has in fact not been disputed, that in order to succeed the applicant must establish that Bharucha became the owner of the business of the said hotel and that the ownership of this business was entirely transferred by Bharucha to the respondents.