1972 (8) TMI 114 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the assessees for tax on commission sales of turmeric.
2. Applicability of exemption from tax for sales made by agriculturist-principals.
3. Aggregation of turnover for multiple principals in assessing tax liability.

Issue-Wise Detailed Analysis:

1. Liability of the Assessees for Tax on Commission Sales of Turmeric:
The assessees, dealers in turmeric and oil, were assessed to tax for the year 1961-62 on a taxable turnover of Rs. 4,95,597.74. The assessing authority rejected the claim for exemption on a turnover of Rs. 1,23,878.50, which represented commission sales of turmeric to self on behalf of agriculturist-principals. The Appellate Assistant Commissioner initially cancelled the assessment on this turnover, holding that the assessees acted only as agents for the agriculturist-principals and did not sell goods to anyone other than themselves. However, the Board of Revenue reversed this decision, stating that the assessees, as selling agents, were liable to tax on the sales effected to themselves, even though they had paid tax on subsequent sales to third parties. The Board concluded that the transaction involved two sales: one by the agriculturists to the assessees and another by the assessees to third parties, thus subjecting the turnover of Rs. 1,23,878.50 to tax at 2%.

2. Applicability of Exemption from Tax for Sales Made by Agriculturist-Principals:
The assessees contended that they should not be liable for tax on the purchases from agriculturist-principals, arguing that the tax liability should not apply as the agriculturist-principals themselves were exempt from tax. The court rejected this argument, clarifying that the assessees were taxed not as buyers but as selling agents of the agriculturist-principals. The court emphasized that under the Tamil Nadu General Sales Tax Act, a commission agent is considered a "dealer" and has a separate turnover, regardless of the principal's liability. The court cited previous judgments, including Kanyakaparameswari Ginning and Groundnut Oil Mill Contractors Co. v. State of Madras and Deputy Commissioner of Commercial Taxes v. Anantharama Nadar & Sons, to support the view that the exemption available to agriculturist-principals does not extend to their agents unless the agent has grown the produce on their own land or land in which they have an interest.

3. Aggregation of Turnover for Multiple Principals in Assessing Tax Liability:
The assessees argued that their liability should be determined with reference to each agriculturist-principal separately, suggesting that there should be multiple assessments rather than aggregating the turnover. The court dismissed this argument, referencing the definition of "turnover" in section 2(r) of the Tamil Nadu General Sales Tax Act, which mandates the aggregation of all transactions effected by the agent, either on their own account or on behalf of others, for determining the total turnover. The court distinguished this case from the Andhra Pradesh High Court's decision in Irri Veera Raju v. Commercial Tax Officer, which did not consider the definition of "turnover" and emphasized the agent's representation of each principal. The court concluded that the statutory definition of "turnover" requires the aggregation of all transactions by the agent, thus supporting the Board of Revenue's assessment.

Conclusion:
The court dismissed the tax case, upholding the Board of Revenue's decision to subject the turnover of Rs. 1,23,878.50 to tax at 2%. The court ruled that the assessees, as selling agents, were liable for tax on the sales effected to themselves and that the exemption available to agriculturist-principals did not extend to their agents. The court also affirmed that the aggregation of turnover for multiple principals was legally permissible under the statutory definition of "turnover." The petition was dismissed with costs, and counsel's fee was set at Rs. 150.