IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 4.11.2011 CORAM THE HON'BLE MR.JUSTICE P.JYOTHIMANI AND THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C. (Revision) No.279 of 2011 The State of Tamil Nadu rep. by the Deputy Commissioner (Commercial Taxes) Salem Division, Salem. .. Petitioner Vs. Variety Jewellery 111, Big Bazaar Street Rasipuram. .. Respondent Tax Case Revision is filed under Section 38 of the Tamil Nadu General Sales Tax Act, 1959 against the order of the Sales Tax Appellate Tribunal (Additional Bench), Coimbatore dated 21.3.2003 passed in CTSA.No.589 of 2001. against the order of the Appellate Assistant Commissioner (CT) Salem dated 22.2.2001 passed in AP.No.369/00 against the order of the Commercial Tax Officer (Assessing Officer) Rasipuram dated 2.5.00 in Assessment order No.3161730/97-98. For Petitioner : Mr.R.Sivaraman Special Government Pleader For Respondent : Mr.R.Seniappan O R D E R (Made by 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: "1. Whether on the facts and circumstances of the case, the Tribunal is right in law in deleting the assessment made under Section 7-A on the gold https://hcservices.ecourts.gov.in/hcservices/ declared under voluntary disclosure of income scheme on turnover of Rs 1176630/-? 2. 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 under Section 7-A of the Act under Entry 25 of Part B of the First Schedule with effect from 7.7.1996?" 2. 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 Rs 3,99,964/- and included it as taxable turnover. 3. 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. 4. On a reference to Section 7A of the Act which relates to levy of purchase tax, which is as follows: https://hcservices.ecourts.gov.in/hcservices/ "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 under Section 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. 5. The concept of "transfer" has been discussed by the Apex Court in a catena of judgments. In respect of transfer under Section 34(3)(b) of the Income Tax, the Supreme Court in Malabar Fisheries Co. v. Commissioner of Income Tax, Kerala, (1979) 120 ITR 49, 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 three conditions are required to be satisfied: (a) that the ship, machinery or plant must have been sold or otherwise transferred, (b) that such a sale or transfer must be by the assessee, and (c) that the same must be before the expiry of 8 years from the end of the previous year in which it was acquired or installed. It is only when these three conditions are satisfied that any allowance made under Section 33 shall be deemed to have been wrongly made and the Income Tax Officer acting under Section 155(5) will be entitled to withdraw such allowance. Further, Section 2(47) gives an artificial extended meaning to the expression “transfer” for, it not merely includes https://hcservices.ecourts.gov.in/hcservices/ transactions of “sale” and “exchange” which in ordinary parlance would mean transfers, but also “relinquishment” or “extinguishment of rights” which are ordinarily not included in that concept. The question is whether the distribution, division or allotment of assets of a firm consequent on its dissolution amounts to a transfer of assets within the meaning of the words “otherwise transferred” occurring in Section 34(3)(b) of the Act, regard being had to the definition of “transfer” contained in Section 2 (47)? To put it pithily, the question is whether the dissolution of a firm extinguishes the firm's rights in the assets of the partnership so as to constitute a transfer of assets under Section 2(47)?" 6. While so, there is no question of purchase made by the dealer during the course of its business, as has been made clear under Section 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. sasi Sd/- Asst. Registrar //True Copy// Sub Asst. Registrar To 1.The Sales Tax Appellate Tribunal (Additional Bench), Coimbatore. 2.The Deputy Commissioner(Commercial Taxes), Salem Division, Salem. 3.The Assistant Commissioner (CT), Salem. 4.The Commercial Tax Officer, Rasipuram. + 1 cc to Mr. R. Senniappan, Advocate SR No.67341 + 1 cc to Government Pleader (Taxes), SR No.67529 T.C. (Revision) No.279 of 2011 KSK(CO)SR/23.11.2011 https://hcservices.ecourts.gov.in/hcservices/