Ranganath Misra, J. - (1.) This appeal by special leave is directed against the Judgment of a Division Bench of the Madras High Court in Tax Case No. 72 of 1968.
(2.) Respondent, a firm, is a registered dealer under the Madras General Sales Tax Act, 1959 (hereafter 'Act' for short). The Deputy Commercial Tax Officer completed the assessment for the year 1962-63 by his order dated 6-8-1973. While examining the accounts of the subsequent year, the Assessing Officer discovered a transaction relating to sale of a film named "Nanum Oru Penn" to M/s. A.V.M. Productions for a consideration of Rs. 1,91,903-57 on 30th March, 1963. As the transaction related to the year 1962-63, the Assessing Officer reopened the assessment for the previous year and included the sale price in the turnover, and raised the demand along with penalty. The reassessment was unsuccessfully challenged in appeal before the Appellate Assistant Commissioner. Before the Tribunal in second appeal the question as to whether sale of the incomplete film was goods, as contemplated under the Act, was raised. The Tribunal took into account the definition of the word "goods" in the Act and kept in view the ratio of the decision of the Madras High Court in the case of Meiyappen v. Deputy Commr. (1967) 20 STC 115 and held that the transaction did not amount to sale. The revenue carried the matter to the High Court. The High Court held: "Under the terms of the agreement, the sum of Rs. 1,91,903.57 paisa is paid to the assessee by the transferee under heads and it cannot be equated to the actual value of the unfinished film for the unfinished film may not have any value at all unless the picture is completed. That is why the transferees had specifically bargained for the transfer of all the rights in the picture. Therefore, we are inclined to construe the agreement as one enabling the transferee to complete the unfinished picture at its cost on condition of its paying all the expenses incurred so far by the assessee as a transferor for producing the unfinished film. It is not possible to construe this agreement as a pure sale of the unfinished film. We therefore agree with the conclusion of the Tribunal that the agreement cannot be construed as a sale of goods, though for a different reason." The High Court, however, took the view that the value of the settings and the value of costumes were liable to tax as it constitutes sale of tangible articles. The decision of the High Court is under challenge.
(3.) The Madras Act defines goods thus in S.. 2 (j): "all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes all materials, commodities, and articles (including those to be used in the fitting out, improvement or repair of movable property) ; and all growing crops, grass or things attached to, or forming part of, the land which are agreed to be severed before sale or under the contract of sale". The agreement under which the sale took place is on record. It is not disputed that apart from the two items which the High Court has held to be taxable, there were other moveable items which were also sold. There was transfer of title therein and the respondent parted with the same in favour of the purchaser. The argument adopted by the respondent on the basis of the Copyright Act is totally misconceived. Provisions of the Copyright Act are not relevant for the determination of the question whether the transaction constitutes 'sale of goods' for giving rise to tax liability under the Act. An incomplete film is certainly goods for the purpose of the Act in terms of the definition of the word occurring in the Act. And whether Copyright is acquired in respect of an incomplete film is not the appropriate basis to resolve this dispute. The Tribunal as also the High Court were wrong in adopting the contrary approach.;