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Judgment
P. Jyothimani, J.—The State has preferred this revision against the order of the Sales Tax Appellate Tribunal (Additional Bench),
Coimbatore dated 21.3.2003 passed in CTSA. No. 589 of 2001, by formulating the following questions of law:
Whether on the facts and circumstances of the case, the Tribunal is right in law in deleting the assessment made u/s 7-A on the gold declared
under voluntary disclosure of income scheme on turnover of ` 1176630/-?
Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in ignoring the clarification issued in
D.Dis.Acts. Cell-II/72705/98, dated 2.12.1998 wherein it was clarified that the gold jewellery declared under voluntary disclosure of income
scheme and used for manufacture of jewels are liable to be taxed u/s 7-A of the Act under Entry 25 of Part B of the First Schedule with effect
from 7.7.1996?
The revision pertains to the assessment year 1997-1998. During the said year, the dealer (partnership firm) has disclosed a turnover of `
11,76,630/-in respect of the old gold, stated to have been disclosed under the Voluntary Disclosure Scheme under the Income Tax Act by the
wife of one of the partners. The Assessing Authority presumed that the old gold disclosed has been brought into the capital account of the
partnership firm by one of the partner, on behalf of his wife (who is admittedly not a partner), and thereby estimated the value of the gold at `
3,99,964/-and included it as taxable turnover.
On appeal filed by the dealer, the assessment order has been reversed by the Appellate Assistant Commissioner on the clear finding that the
said jewels belonged to the women folk of the respective partners of the dealer and not old jewels as presumed by the Department for being
converted by manufacture into new ones. The Tribunal while confirming the said order of the Appellate Assistant Commissioner in favour of the
dealer, has relied upon the clarification stated to have been issued on 21.1.1999, which is as follows:
Gold Jewellery declared under VDIS. Gold jewellery in good condition personally held as on 1987 and brought to the capital account under VDIS
and gold jewellery in good condition purchased from other persons who had disclosed the stock under VDIS, when they are sold as such, are not
liable to tax either under entry No. 3 in Part B of the First schedule as last purchase on worn out jewellery or under Sec.7A of the TNGST Act.
wherein it is stated that in respect of the voluntary disclosure scheme, if an individual has disclosed and sold the gold as such, that will not attract
Entry No. 3 in Part B of the First Schedule or Section 7A of the Tamil Nadu General Sales Tax Act (for brevity, ""the Act""). It is against the said
order, the State has filed the present revision.
On a reference to Section 7A of the Act which relates to levy of purchase tax, which is as follows:
Section 7-A. Levy of Purchase Tax - (1) Subject to the provisions of sub-section (1) of Section 3, every dealer who, in the course of his business,
purchases from a registered dealer or from any other person, any goods (the sale or purchase or which is liable to tax under this Act) in
circumstances in which no tax is payable u/s 3 or 4 as the case may be, (not being a circumstance in which goods liable to tax under sub-section
(2) of Section 3 or Section 4, were purchased at a point other than the taxable point specified in the First or the Second Schedule) and either,
(a) consumes or uses such goods in the manufacture of other goods for sale or otherwise; or
(b) disposes of such goods in any manner other than by way of sale in the State; or
(c) despatches or carries them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or
commerce, shall pay tax on the turnover relating to the purchase as aforesaid at the rate mentioned in Sections 3 or 4, as the case may be.
it is clear that the purchase by the firm must be in the course of its business. On the facts and circumstances of the present case, admittedly, when
the voluntary disclosure of income was made by the wife of one of the partners in respect of some of her jewels, the husband, who happened to be
the partner of the firm, is stated to have pooled it into the capital of the firm and that can never be treated as purchase made by the firm during the
course of business.
The concept of ""transfer"" has been discussed by the Apex Court in a catena of judgments. In respect of transfer u/s 34(3)(b) of the Income Tax,
the Supreme Court in Malabar Fisheries Co. Vs. Commissioner of Income Tax, Kerala, , has held as follows:
On a plain reading of Section 34(3)(b) it will appear clear that before that provision can be invoked or applied threeconditions are required to be
satisfied: (a) that the ship,machinery or plant must have been sold or otherwisetransferred, (b) that such a sale or transfer must be by theassessee,
and (c) that the same must be before the expiryof 8 years from the end of the previous year in which it wasacquired or installed. It is only when
these three conditionsare satisfied that any allowance made u/s 33 shallbe deemed to have been wrongly made and the Income TaxOfficer acting
u/s 155(5) will be entitled towithdraw such allowance. Further, Section 2(47) gives anartificial extended meaning to the expression ""transfer"" for,it
not merely includes transactions of ""sale"" and ""exchange""which in ordinary parlance would mean transfers, but also""relinquishment"" or
extinguishment of rights"" which areordinarily not included in that concept. The question iswhether the distribution, division or allotment of assets of
afirm consequent on its dissolution amounts to a transfer ofassets within the meaning of the words ""otherwisetransferred"" occurring in Section 34(3)
(b) of the Act, regardbeing had to the definition of ""transfer"" contained in Section 2(47)? To put it pithily, the question is whether thedissolution of a
firm extinguishes the firm''s rights in theassets of the partnership so as to constitute a transfer ofassets u/s 2(47)?
While so, there is no question of purchase made by the dealer during the course of its business, as has been made clear u/s 7-A of the Act,.
In such view of the matter, we find no reason to interfere with the order of the Tribunal. Accordingly, the revision stands dismissed and
consequently, the questions of law are answered in favour of the assessee and against the State. No costs.