COMMISSIONER OF SALES TAX Vs. RUKIYABAI ISMAIL

JUDGEMENT

(1.) THE facts which have given rise to this Reference under S. 34(1) of the Bombay ST AC, 1953, and which we have been able to gather with considerable difficult in the absence of a proper statement of the case from the Tribunal are that one Abdul Kadar Ismail was carrying on business as the sole proprietor of Abdul Kadar Ismail and Co. The said proprietary concern of Abdul Kadar Ismail and Co. carried on business in hats, hosiery and handbags at shop No. 12 in Sardar Griha Building situated at Carnac Road, Bombay, under the name and styel Bombay Hat Show Rooms. Abdul Kadar was registered as a dealer under the Bombay ST Act, 1946, and thereafter also under the Bombay ST Act, 1953. It appears that Abdul Kadar borrowed on or about 18th may, 1949 a sum of Rs. 5,000 from his sister Rukhiabai and a further sum of Rs. 20,000 from her on or about 14th Aug., 1951. By an agreement dt. 4th Oct., 1951 entered into between Rukhiabai, referred to in the said agreement as the 'Lender', and Abdul Kadar, referred to in the said agreement as the 'Borrower', the said aggregate loan of Rs. 25,000 was acknowledged by Abdul Kadar and it was agreed that the said sum of Rs. 25,000 would be repaid by Abdul Kadar to Rukhia Bai within a period of five years. Under the said agreement, as security for the repayment of the said sum of Rs. 25,000 within the aforesaid period Abdul Kadar agreed that he would not deal with or sell his said business of Bombay Hat Show Rooms or its goodwill, fittings, furniture or stock-in-trade or the tenancy rights of the said business premises to anyone and that he would carry on the business thereon in the ordinary course of business and pay and discharge all his debts and liabilities and replace the stock from time to time and that the said business of Bombay Hat Show Rooms together with its goodwill, fittings, furniture, stock-in-trade and tenancy rights of the business premises would remain a first charge for the repayment of the said loan of Rs. 25,000 by Abdul Kadar to Rukhiabai. The said agreement further provided that on failure of Abdul Kadar to repay the said amount, Rukhiabai would be entitled to recover the same from the said business of Bombay Hot Show rooms and its goodwill, fittings, furniture, stock-in-trade and tenancy rights.

(2.) ABDUL Kadar failed to repay the said loan or any part thereof to Rukhiabai. The record would show that he had also incurred other liabilities. By his letter dt. 25th June, 1957 Abdul Kadar intimated to his landlady Mrs. Vijayalaxmi G. Salekar that he would vacate the said premises by the end of July, 1957 and requested her to take possession of the said premises by that date. By a letter dt. 20th July, 1957 he against reminded her to taken vacant possession of the said premises. By her letter dt. 27th July, 1957 the landlady confirmed that she had taken vacant possession of the said premises. It appears that in the meantime Rukhiabai had opened negotiations with the landlady to take on rent the said premises in which the said business of Bombay Hat Show Rooms had been conducted. By her letter dt. 30th July, 1957 addressed to the landlady Rukhiabai repeated the request to permit her to become the tenant of the said premises. She followed it up with her letter dt. 31st July, 1957 in which she pointed out that she was a mortgagee of the stock- in-trade, furniture and fixtures belonging to Abdul Kadar and lying in the said premises and once against reiterated her desire to become the tenant of the said premises from 1st August, 1957. The landlady accepted her offer by endorsing at the foot of the said letter the remark. "I confirm". On the same day, namely, 31st July, 1957, an agreement was entered into between Abdul Kadar and Rukhiabai under which, after stating that the said loan of Rs. 25,000 was still due and outstanding. Abdul Kadar sold and transferred for a consideration of Rs. 23,200 all the furniture, fixtures and stock-in-trade of Bombay Hat Show Rooms lying at the said premises, which sum was taken in part satisfaction of the principle amount of Rs. 25,000. Rukhiabai commenced her own business of hats and ladies handbags in the said premises on and from 1st Oct., 1957 in the name of Rukhiabai Ismail.

(3.) THEREAFTER by his order dt. 11th Sept., 1964 the Dy. CST, in exercise of the powers of suo moto revision vested in him, set aside the order of the Assistant CST and held that Rukhiabai was a transferee of the said business and as such liable for the amount of tax and penalty due from Abdul Kadar Ismail and Co. Rukhiabai approached the ST Tribunal in revision and the Tribunal reversed the order of the Dy. CST holding that Rukhiabai was not a transferee of the said business.