LexM/S. T. V. SUNDRAM IYENGAR & SONS versus THE STATE OF MADRAS
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M/s. T.V. SUNDRAM IYENGAR & SONS
v.
THE STATE OF MADRAS
October 10, 1974
(H. R. KHANNA AND A. C. GUPTA, JJ.)
&k8 Tax-Construction of bru bodka and fitting to chMaiJ provided b;y custo-
tMr._Propert.Y in the material ustd by assessee, whethtr ]JQ88td to thtlr customers
dwlng the cDurse ~I corutructiorr.
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1n Civil Appeais Nos. 22?.9. 2230 and 2231 of 1969. the Appellate Assistant
Qnnmissioner and the Appellate Tribunal held that the appellant company was
liable to pay sales tax under the,Madras General Sales Tax Act, 1939. in respect of
bodies constructed and fitted by it to the chassis provided by the customers. No
formal agreements were produC'.ed by the assessee and the nature of the transactions
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relatin1 to the supply of bus bodies has been found on the basis of .. repair orders".
These appeals on certificate have been filed against the judgment of the Madras
High Court by the eppeUant-as$essee company. Civil Appeals Nos. 290 and 291
of 1970 have been filed on certificate by the Commissioner of Cc mm( rcial Taxes
Mysore against the judgment of the Mysore Hi~h Court. The return ·filed by the
assessee-firm for the year 196()..61 showed rece1pt of Rs. 9174,460 on account of
the bus bodies constructed under agreement dated January 23, 1959 between the
assessee-firm .and the Govemment for the construction of bus bOdies on the chassis
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supplied by the Govt, The ·conunercial Tax Officer, held that the said amount
represented the pri~ of the bus bodies received by the assessee and included it in
the taxable turnover under the Mysore Sales Tax Act, 1957. On appeal the Deputy
Commissioner of Commercial Taxes held that the agreement between the assessee
and the Govt. was in the nature of a works contract and as such there was no sale
of bus bodies. The Commissioner in exercise of'his revisional power set aside the
order of the Deputy Commissioner and restored that of ~he Commercial Tax Officer.
In the opinion of the Commi:ssioner, there was a sale of bus bodies by the assessee.
In appeal, the Mysore High Court set aside the order of the. Commissiober and
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restored that of the Deputy Commissioner. In the opinion of the High Court
the agreement between the as!;essee and the Govt. was for. works contract.
It was contended for the assc:~s'e that the c,cnstructic n cftbe bus bJ"dies and
the supply of the same by the assessees to their customers was in pursuance of
a contract for work and labour.
HELD: (I) The Madra:s General Sales Tax Act, 1939 and. the Mysore Sales
Tax Act, 1957, have been enacted respectively in pursuance of the powers oontained
in entl)' 48, List Jl, Schedule Vll of the Government of India Act 1935, and entry
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sc. List n1 Schedule VII of the Constitution of Indi~ 1950. It is now settled taw
that the words "sale of goods!• bave·to be construed not in the popular sense but in
their legal sense and should be siven the same meaning which they carry in the Sale
of Goods Act, 1930. The expression '"sale of goods .. is a nomen jlll'ls, its essential
ingredients being an agreement to seD movables for a price and property pas.'liog
thcreiill pursuant to that agreement; (377 F--Ql
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· The State of MadriU -v. Gmuwn l>unurley & Co. (1958) 9 S.T.C. 353 followed.
(ii) The salient features of the dealings between the two assessees disclose that
G
dle property in the material used by the ~
in oonstructins the bus bodies
never passed to their customers durin& the course of construction. Tt was only when
the complete bus with the body fitted to c;tassis was delivered to the customer that·
the J)lOperty io the bus body passed to the customer. There was nothing to pre\Tcot
the assessee from removing a plank, or other materi~ after fixing it to a chassis.
and using it for a difl'erent purpose or for a difl'erent bus body. The PJ'CSCDt is' also
aot the case wherein the asses.1ee undertakes to construct some building or set ap
D factory wherein the material Used caD be said to become the property of the other
party by invoklns the theory of accretion. It is no doubt true that tho bus bodies
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supplied by the aasee:~CCS were not ready made and bad. it""Cftf"Mry, to be C01HtnJC.
ted bit by bit ud pJant by plank, ICCOl'Ctina to sped&atlon. bUc thet &a wc•uld
aot mate u:iy material ditt'c{eDOe. [379-H: 310 A-B)
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T. V, SUNDRAM & SONS v. MADRAs (Khdnno, ]. )
373
Patrtalk and ComJHmy v. The State of Orl.sstZ, (1965) 16 STC 364, aExcerpt shown. Read the full judgment & AI analysis in Lexace.