ACTIONABLE CLAIMS SOME EXAMPLES: We shall now examine some of the

judicial pronouncements by courts on what claims can be recognized as "actionable claims".

The following items are held to be actionable claims and the related case laws are given in
brackets. Arrears of rent were held to be a debt. ( State of Bihar v MDS K singh AIR 1952
SC 252) Lottery ticket is an actionable claim ( sunrise associates v Govt of NCT Delhi AIR
2006 SC 1909) A right to a benefit of a contract ( SM Deoji v UOI AIR 1957 Nag 31) A right
to credit in a provident fund( B.Mohandass v P C Chakravarty AIR 1935 Cal 756)
Debuntures (London and India docks co (1906) 95 LT 536 Dividend on shares Negotiable
instruments like bills of exchange, Pro-notes etc Bank guarantee Insurance claims Right
shares or option to purchase shares Share in a partnership property Right under a license. 6.
NON-ACTIONABLE CLAIMS: The following items are held to be non actionable claims. A
claim to mesne profit is not a debt as it is not liquidated. A decree for debt is not an
actionable claim since it was a debt prior to the decree and no action is necessary to enforce
the claim. The right to recover damages for breach of contract. A copyright. Where a decree
provides for a future decree, this future decree is also not actionable claim.

ASSIGNMENT OF ACTIONABLE CLAIMS

An actionable claim may be transferred by way of sale, mortgage, gift or exchange etc. But
the said transfer or assignment of an actionable claim must be evidenced by an instrument in
writing signed by the transferor or his power of attorney. The assignment can be made by an
endorsement at the back of a document comprising the actionable claim is enough and no
separate document is necessary. The transfer would be effective from the date of the
execution of the deed or assignment and would bestow on the transferee all the rights and
remedies of the transferor. After the transfer, the transferee is subjected to all the liabilities
and equities to which the transferor was subjected at the date of the transfer. The transferee,
in his own interest, must give notice of the transfer to the debtor, as early as possible. Once
the debtor receives the notice of assignment, he becomes liable to pay the debt only to the
transferee. Such a notice must be in writing and it must state the name and address of the
transferee. There is no time limit for giving the notice.

LIABILITY TO VAT

Having considered the definition and assignment of actionable claims let us discuss about the
tax liability arising out of the transfer of actionable claims. We have already noticed that the
word "goods" under GST includes actionable claims. But the crucial point to be noted is that
it is not regarded as "goods" under the sale of goods act 1930 and this aspect may stir up
controversies in the days to come. Let us see the definitions under the general law on sale of
goods and the specific tax laws such as GST and CST Act 1956.

DEFINITION OF "GOODS UNDER CGST: Section 2(1) of CGST Act defines "goods" to
mean every kind of movable property other than money and securities but includes actionable
claim, growing crops, grass and things attached to or forming part of the land which are
agreed to be severed before supply or under a contract of supply. 10. DEFINITION OF
"GOODS" UNDER SALE OF GOODS ACT 1930: "Goods" means every kind of movable
property other than actionable claims and money; and includes stock and shares, growing
crops, grass, and things attached to or forming part of the land which are agreed to be severed
before sale or under the contract of sale. [Section 2(7)]. 11. DEFINITION OF "GOODS"
UNDER CST ACT 1956: "Goods" includes all materials, articles, commodities and all other
kinds of movable property, but does not include newspapers, actionable claims, stocks, shares
and securities. [Section 2 (d)] 12. ANALYSIS OF THE VARIUOS DEFINITIONS On going
through the definitions above it is clear that GST law includes actionable claims in the
definition of goods whereas sale of goods Act and CST act excludes the same. We shall
ignore CST Act since the same shall get subsumed in GST and hence not relevant. But the
impact of the definition excluding actionable claims under Sale of Goods Act may present
some difficulties. The Hon Supreme court in Gannon Drunkerlys case very clearly held that
while interpreting the expression "sale of goods" in a taxation law or in the constitution the
scope and meaning of that expression under the Sale of Goods Act have to be considered. But
it may be noted that actionable claims are goods at the first instance and have all the features
of goods. Exactly for that reason only the definition under sale of goods Act excludes the
same. If actionable claims are not goods there is no necessity for its exclusion. Hence tax
liability may arise when the same is transferred or supplied. The decision in Gannon
Drunkerly is not relevant as the said decision is an authority for the proposition relating to
what constitutes "sale of goods" when transfer takes place in a form other than "goods". In
other words Gannon Drunkerly is not an authority for the proposition that if a particular item
is not regarded as goods under the Sale of Goods Act then the states shall not get the taxing
power under the constitution. 13. CONCLUSION In view of the above discussion it is to be
concluded that transfer or assignment of actionable claims shall attract levy of GST or sales
tax in view of the specific inclusion in the definition of "goods". But the matter is not entirely
free from doubt and hence in certain specific situations the taxability may be subject matter
of controversy and the courts may have to resolve those issues. Whether actionable claims
can be regarded as goods itself may be a subject matter of controversy and for that reason the
taxing power under the constitution may also be challenged. Let us wait and see.