The mere fact that the Government of India sold surplus war equipment through the Directorate of Disposals did not make it a "dealer" within the meaning of the Bengal Finance (Sales Tax) Act, 1941.

Judgment

SHAH, J. : I regret my inability to agree with the view expressed by Ramaswami, J.

2. Section 2 (c) of the Bengal Finance (Sales Tax) Act, 1941, defines a "dealer" as meaning "any person who carries on the business of selling goods in West Bengal and as including the Government".

3. The Government of India set up a organisation - the Directorate of Disposals (United States Transfer Directorate) - to dispose of war equipment taken over by them from the American forces after the Second World War. This organisation had several branches under its control. A part of the equipment was appropriated by the Government of India to their own use; some equipment was sold to the State Government and other autonomous bodies; and the rest was sold to the public. The taxing authorities held that the Directorate was a dealer within the meaning of the Bengal Finance (Sales Tax) Act, 1941 and the High Court of Calcutta in a reference made under S. 21 (3) agreed with that view.

4. It is common ground that the Government of India paid no consideration for acquiring the equipment: they merely set up an organisation to dispose of the equipment. It is not, and cannot be, argued that because the Government of India received the equipment free of cost it could not set up a business to dispose of that equipment. An owner of goods may commence business in those goods by converting them into stock-in-trade of his business. The sales made by the Government of India through the Directorate were not casual: they were spread over a number of years. The equipment included goods of great diversity which were disposed of with the help of a widespread organisation. The goods offered for sale were frequently advertised in newspapers and auctions were held from time to time to dispose of the goods. Was the Government of India entering upon this Activity merely realizing capital or was it carrying on business in the American surplus was equipment ?

5. This Court observed in State of Andhra Pradesh v. H. Abdul Bakshi and Bros., 1964-15 STC 644

"The expression "business" though extensively used is a word of indefinite import. In taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure."

6. In Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax, 1954-26 ITR 765, Das J., delivering the judgment of the Court observed:

"The word "business" connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose."

7. An owner of goods may dispose of his property in one lot or from time to time in different lots. By merely realizing the value of a capital asset, the owner does not become a dealer. Where, however, he sets up an organization - a substantial and systematic course of activity - to sell the goods with a profit motive, he may in the light of other circumstances be deemed to have entered into an activity in the nature of business or trade. The line between the two classes of cases is thin and sometimes may be blurred. But in the present case, it cannot be said that the activity undertaken by the Government of India for disposal of the American surplus war equipment was merely an activity of the nature of realization of capital. There was an organised course of activity, it was systematic and it was with a set purpose of making profit. The tests of frequency, continuity and system which are generally employed in determining whether an activity for the disposal of goods owned by a person indicates an intention to carry on business are satisfied in this case. The inference does not arise merely from the existence of a selling organisation or systematic sales, but from the totality of circumstances.

8. In Commissioner of Taxe