Vraj Tractor Industry V. State of Rajasthan, the Hon’ble High Court of Rajasthan vide its order dated 23 September 2010 in D.B. CIVIL SPECIAL APPEAL (WRIT) NO. 220 OF 2003

Mere Sale of fixed assets does not amounts to ‘Transfer of business’, no liability can be fastened on the transferee to pay the unpaid tax dues of transferor.

Facts: In this case, the petitioner purchased the assets of one defaulting unit M/s. Jodhpur Auto Agric Products Ltd. in an auction conducted by the Rajasthan State Financial Corporation, for realization of their dues from the defaulting unit by sale of assets of the unit. Consequent upon the purchase of assets by the petitioner as an auction purchaser, a general demand was raised by the Industries Department calling upon the petitioner to satisfy all kinds of old outstanding dues of the defaulting company.

Issue: Whether the petitioner being the purchaser of the assets from a defaulting person is liable to pay the outstanding dues in relation to his business which he was carrying with such assets.

Held: The Hon’ble Rajasthan High Court, held that the where there is only the ‘fixed assets’ of the defaulting dealer which is transferred and not the ‘running business’, then the transferee i.e. the purchaser of assets would not be liable to pay the outstanding tax dues of the defaulting dealer in respect of his business. No liability can be fastened on the transferee until the entire business is transferred.

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