1966 (10) TMI 121 - SC - VAT and Sales Tax

Whether the respondents are liable to be taxed under section 14-A of the Act in respect of their turnover on the transactions effected on behalf of their principals residing either in the Kasargod Taluk or in places in the former District of Malabar for the period from 1st November, 1956 to 31st March, 1957? Held that - Appeal allowed. The judgment of the Mysore High Court in these appeals should be set aside and the cases of the respondents should be remanded to the Commercial Tax Officer, Additional Circle, Mangalore, for ascertaining whether the disputed turnover had been included in the turnover of the non-resident principals of the respective respondents, and thereafter to proceed to make the assessments in accordance with law.

Issues Involved:
1. Liability of respondents to be taxed under section 14-A of the Madras General Sales Tax Act, 1939.
2. Validity of the licence issued under section 8 of the Act post-States Reorganisation Act, 1956.
3. Interpretation of "State" in the context of the Mysore Adaptation of Laws Order, 1956.

Detailed Analysis:

1. Liability of Respondents to be Taxed Under Section 14-A:
The primary issue in these appeals was whether the respondents, who acted as commission agents for principals residing in Kasargod Taluk or the former District of Malabar, were liable to be taxed under section 14-A of the Madras General Sales Tax Act, 1939, for the period from 1st November, 1956, to 31st March, 1957. The court held that the respondents were indeed liable to be taxed under section 14-A. The scheme of section 14-A is such that the non-resident principal is assessed to tax, and the agent is deemed to be the dealer for the purposes of assessment, levy, and collection of the tax. The agent is liable to pay the tax irrespective of whether the turnover was less than the minimum specified in section 3(3). Therefore, the respondents, acting as agents for non-resident principals, were liable to be assessed under section 14-A.

2. Validity of the Licence Issued Under Section 8 Post-States Reorganisation Act:
The respondents had obtained licences under section 8 of the Act before the States Reorganisation Act came into force. The court examined whether these licences continued to grant exemption from tax after 1st November, 1956. It was argued that the High Court erred in holding that the licences issued before 1st November, 1956, granted exemption to the respondents for transactions on behalf of principals residing outside the "Madras Area". The court found this argument well-founded. Clause 4 of Form V of the licence explicitly states that the licence does not apply to transactions on behalf of principals residing outside the Madras State. Post-reorganisation, the term "Madras State" should be interpreted as "Madras Area". Therefore, the licences did not grant exemption for transactions on behalf of non-resident principals after 1st November, 1956.

3. Interpretation of "State" in the Context of the Mysore Adaptation of Laws Order:
The court also addressed the interpretation of the term "State" in the context of the Mysore Adaptation of Laws Order, 1956. According to clause 4 of the Mysore Adaptation of Laws Order, the words "State of Madras" or "Madras State" should be substituted with "Madras Area" in any Act in force on 1st November, 1956, unless the context otherwise requires. The court rejected the respondents' argument that the word "State" in the licence could not be construed as "Madras Area". Even if the licence is not considered "law" within the meaning of the Mysore Adaptation of Laws Order, the term "Madras State" in clause 4 of Form V should be interpreted in the context of the adapted provisions of the Act and the Rules. Consequently, the words "Madras State" in clause 4 of Form V should be read as "Madras Area" after 1st November, 1956.

Conclusion:
The Supreme Court set aside the judgment of the Mysore High Court and remanded the cases to the Commercial Tax Officer, Additional Circle, Mangalore, for ascertaining whether the disputed turnover had been included in the turnover of the non-resident principals. The assessments were to be made in accordance with law. The appeals were allowed with costs.

← Previous Next →