Desai, C.J. - (1.) This is 3 reference made by the Judge (Revisions) at the instance of the assessee under Section 11(1) of the O.P. Sales Tax Act. The question referred is: 1. Whether Rule 44(f) of the U. P. Sales Tax Rules applies only to the transfer of business as a whole; (a) in the case of multi-point goods, (b) and in the case of single point goods, (c) when transfer is made by a person who is not liable to pay tax?
(2.) It appears from the statement of the case that the assessee was a dealer in cloth liable to tax at a single point. The question is of assessment to sales tax for the year 1955-56. The assessee closed the business on 28-11-1955 and sold the entire business together with the stock in trade for the lump sum of Rs. 72,477/-/6. Though what was sold included some cloth, it is not known what was the price for which that cloth was sold because the business and the stock in trade were sold together for one sum. The assessee is admittedly a person liable to pay sales tax. It submitted returns showing gross turnover of Rs. 2,36,432/14/9, which amount included a turnover of about Rs. 7,000/- on account of sale of cloth purchased in U. P. Therefore, the net turnover on which it was liable to pay tax was, according to the returns, Rs. 2,29,5/9/12/6. During the assessment proceedings the Sales Tax Officer did not accept the figure of the gross turnover and estimated, according to his best judgment, at Rs. 2,60,000/-. This amount included RS. 72,000/- and odd on account of sale of the business but he assessed the assesses on Rs. 2,60,000/- without excluding the sale proceeds of the business from the turnover. On appeal the Judge (Appeals) reduced the amount of the gross turnover from Rs. 2,60,000/-to Rs. 2,00,000/-. He further held that sale proceeds of the business should not be induced in the turnover on which tax was payable. But he fixed the amount of the turnover on which tax was liable at Rs. 2,00,000/- instead of at RS. 1,87,000/- and odd. Why he deducted only Rs. 60,000/- and not Rs. 72,000/- and odd is not known. The assessee submitted itself to the order passed by the Judge (Appeals) but the Commissioner of Sales Tax filed an application under Section 10 for revision of the order of the Judge (Appeals). The Judge (Revisions) held that the amount of the sale proceeds of the business was not to be excluded in the turnover on which tax was payable and, therefore, added back Rs. 60,000/- which had been excluded by the Judge (appeals). In the result he restored the order of the Sales Tax Officer and assessed the assessee to tax at Rs. 2,60,000/-. Then at the instance of the assessee he referred the question to this Court.
(3.) Section 3(i) of the Act lays down that, "Subject to the provisions of this Act, every dealer shall for each assessment year, pay a tax at the rate of three pies per rupee on his turnover of such year, which shall be determined in such manner as may be prescribed." "Turnover" is defined in Section 2(h) to mean the aggregate amount for which goods are supplied or distributed by way of sale. "Goods" means, vide Section 2(d), every kind of moveable property. Business is admittedly not a moveable property and, is, therefore, not goods and proceeds of sale of a business are not turnover and no tax is payable on them under Section 3(i) itself, Section 3-A(1) lays down that: "Notwithstanding anything contained in Section 3, the State Government may, by notification in the Official Gazette, declare that the turnover in respect of any goods shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify." The effect of this provision is that though some goods may be sold by several successive dealers the sale by only one of them will be liable to tax and which of them will be liable is left to be prescribed by the State Government. The cloth in which the assessee dealt was liable to be taxed by only one out of several successive dealers and it is not in dispute that it was the assessee who was liable to pay tax on its sale. The sale proceeds of the cloth were, therefore, included in the turnover within the meaning of Section 3. Section 4 lays down that no tax shall be payable on the sale of (1) water, milk, salt etc., (2) and other goods which the State Government may by notification in the official Gazette exempt and (3) any goods by any person or class of persons which may be exempted by the State Government. The effect of Sections 3-A and 4 is to prohibit proceeds of sale of certain goods from being taxed even though they are turnovers. The general provision in Section 3 that a dealer shall pay a tax on his turnover, is subject to these provisions, i.e. he is not required to pay a tax on the turnover in respect of the sales mentioned in them. Under Section 24 of the Act the State Government nave the power to make rules to carry out the purposes of the Act and in particular providing for all matters expressly required or allowed by the Act to be preserved. Among the rules made by the State Government in exercise of this power is Rule 44, the material portion of which is as follows: "The tax under Section 3 shall be computed on the net turnover. In determining the net turnover the amount specified below, shall be deducted if they are included in the gross turnover: (d) all amounts for which goods exempted under Section 4(1) (a) of the Act are sole;; (e) all sale proceeds of goods covered by an exemption, certificate under Section 4(1) (b) on condition that ..............; (f) all amounts realised by a dealer on account of the sale of his business as a whole; and (g) all amounts realised by the sale of goods notified under Section 3-A except when.. . . .";