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Report No. 61

Two Types of Transactions

2.7. Bona fide consignments and sham consignments.-

It seems to us that in examining this question, two types of transactions have to be kept apart from each other, namely,-

(i) bona fide consignments, and (ii) sham consignments.

Where goods are consigned from one branch of an establishment to another, bona fide, there is no 'sale', because there cannot be a sale by the seller to himself. To constitute a 'sale', there must be two different persons.1

Where, on the other hand, the consignment from branch to branch is a sham transaction, and the transaction is, in reality, one intended to transfer property to a different 'person', there is no legal difficulty in taxing it as a sale.2 No doubt, it may not be easy to discover the true nature of the transaction; and the process of gathering the relevant facts may involve some labour.

1. Cf. section 2(1)(g), Central Sales Tax Act, 1956.

2. Mahindra Kumar v. State of Madras, (1968) 12 STC 72 (Mad).

Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back

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