The initial intention or object with which the goods in question are purchased is a relevant factor in deciding whether the sale thereof was a part of the business or a business activity of the assessee.

Judgment

SHELAT,C. J.

( 1 ) THE question arising in this reference is whether the petitioners can be said to be dealers in cotton within the meaning of the definition of "dealer" in section 2 (6) of the Bombay Salestax Act, 1953, and whether the sale of 411 bales of Californian cotton effected by them during the assessment year 1953-54 can be included in their total turnover and be charged to sales tax. The petitioners are manufacturers of cotton textile goods and for the purpose of conducting their aforesaid business, they have necessarily to purchase cotton from time to time. During the year 1953-54, the petitioners purchased cotton of the value of Rs. 47,75,769. 00 and out of the cotton so purchased, they sold 411 bales of Californian cotton for Rs. 3,89,445. 00 in two lots on the 31st of May, 1953, to the Khatau mills Ltd. , and the Edward Textile Mills Ltd. The price paid by the petitioners for these 411 bales was Rs. 3,91,433. 00, whereas the price realised by them as a result of the said two sales came, as aforesaid, to rs. 3,89,445. 00, resulting actually in the loss of Rs. 1,988. 00. The Sales Tax Officer included these two sales in the turnover of the petitioners and charged sales tax thereon. Aggrieved by this order, the petitioners first went in appeal before the Assistant Collector and thereafter in revision before the Additional Collector and in second revision before the Sales Tax tribunal. These attempts to have the order of the Sales Tax Officer set aside having proved unsuccessful, a reference was made at their instance to the High court of Bombay. The High court felt that the statement of the case made by the tribunal did not disclose sufficient facts to enable it to answer the question referred to it and, therefore, remanded the case to the tribunal for a supplemental statement of the case. The tribunal in its turn called upon the Deputy Commissioner to make his report which the Deputy Commissioner did, but the tribunal felt that the report made to it was not in accordance with the question posed by the High Court and therefore called upon the Deputy Commissioner to make a supplemental report. By that time, the bifurcation of the State of Gujarat from the State of Bombay had taken place and, therefore, the Sales Tax tribunal of Gujarat submitted a supplemental statement of the case, in pursuance of the aforesaid order of the High court of Bombay to this Court. The question referred to this Court is "whether on the facts and in the circumstances of the case the tribunal was right in holding that the applicants were dealers in respect of cotton and that accordingly the sale of cotton was liable to be taxed ?" it would appear that before the tribunal, the petitioners urged that their business was of manufacturing cotton textiles and to sell them and that their business was not of dealing in cotton, that the sales in question were only two and that they were casual sales, that the sales actually resulted in loss, that the initial intention with which theypurchased cotton in question was to use it in their business of manufacturing textile goods and not for selling them at profit and that, therefore, they cannot be said to be dealers in cotton. The tribunal rejected these contentions observing that in the textile mills of this kind, it was not unusual for them to have surplus cotton at times and to sell such cotton and that it was admitted on behalf of the petitioners that in other years also, there had been sales of such surplus cotton. The tribunal also observed that the Memorandum of Association of the petitioner-company set out amongst other objects, for which the company had been established, buying of cotton-seeds, cotton, silk, wool etc. , and the sale of the same and that article 87 of the articles of Association of the company provided that the company had power to buy and sell cotton-seeds, cotton etc. The tribunal at the same time observed that though a large number of objects are usually mentioned in