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TMI Blog1976 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ial in the from the paper etc. is also used. The applicant does not dabble in the sale of photographic goods as such. It prepares photographs as per the job requirements of the customers and such transactions, therefore, do not tentamount to sale transactions as to attract levy of sales tax. In taking a photograph of a customer and preparing its negative and then final positive print for supplying the same to the customer, a photographer only undertakes a contract of work and labour and does not enter into a sale transaction. The customer while placing the order for the photograph, is not making a contract to purchase the paper, on which the photograph is impressed but it is merely as ancillary to the main contract of work and labour. 3. The levy of sale-tax under the new Act has been enforced with effect from 21st Oct., 1975. The relevant entry No. 6 of the First Schedule reads as under:— "Photographic and other cameras and enlargers, lenses, films and plates, paper and other component parts, spare parts and accessories required from use there with including photographic chemicals and photographs………" According to the applicant a genuine doubt ha arisen vis-a-vis the interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et the stated number of copies of photographs and the same was exigible to tax at the rate of 10 per cent by virtue of Notification No. F4(7)/74-Fin. (G) dt. 21st Oct., 1975. 6. Aggrieved against the order of the learned CIT, Ajanta Photo Studio has filed the present appeal and urged that the view taken by the learned CIT is erroneous. The pleas which were raised before the learned CIT were reiterated before me. According to the appellant, the transactions of photographing the clients were not transactions of sale but were contracts of work and labour and were therefore not at all liable for payment of sales tax. Before we proceed to examine the plea of the appellant it would be necessary to note carefully the contracts of entry No. 6 of the first schedule of the Delhi Sales Tax Act, 1975 in order to see if the transactions mentioned by the appellant is covered by that entry. Relevant portion of that entry has already been quoted above. 7. Bearing carefully in mind the said entry, if it was a case of sale of "photographs" simpliciter, there should not have been any difficulty in holding that such a sale was covered by that entry. Here, however, the case of the appellant was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow them. 10. The learned Commissioner was, however, conscious that the Judicial opinion on the point as to whether the contract in question was one of sale of goods was rather sharply divided. It would, therefore, be profitable to example the relevant decisions on the point which may help as to arrive at a correct conclusion. 11. The first case in the point of time is that of D. Masanda & Co. vs. Commissioner of Sales Tax (1957 8 STC 370) decided by the Madhya Pradesh High Court. The contract in that case was as regards the liability of the petitioner D. Masanda & Co. to pay sales tax is respect of photographic goods and materials imported by him and used by him in his business activities as a photographer. The High Court held that the same were liable to sales tax under the relevant entry. It is to be noted that the question whether the taking of the photographs of the client was also liable to sales tax did not arise for consideration in that case. There the question related only to the sale of photographic goods as materials. 12. The next case in chronological order is that of M. Ghosh vs. State of Bihar. In that case the question referred to the Patna High Court was, whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plates with a view to sell them to the public. He also received order for preparing photographs of individuals on enamelled copper plates. The High Court held that when a photographer takes a photograph of his customer and agrees to supply copies as the customer desires, the transaction is one of production of copies intended for sale. 15. The fifth case in chronological order is that of Eastern Photo Studio and Eastern Photo Service vs. The State of Badras, (1975) 35 STC 375. It was held by the Madras High Court in that case that the substance of trading activity of photographer consisted in bringing out a finished product, namely, a photograph from the negative and that it was not a case of work and labour. 16. The sixth case is that of Orient Photo Art Studio vs. State of Orissa. In this case the question was whether on the facts and in the circumstances of the case, the Tribunal, was right in holding that the supply of photographs to the customers on payment was sale and liable to sales tax under the Orissa Sales Tax Act. The Orissa High Court observed that the principle upon which the taxability of such a transaction was determined was as to whether it was a contract of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as follows:— (i) In the case of transaction embodied in Bill NO. 60293 only the contract for the supply of the enlarged photographs as reproduced on paper of the particular size excluding the work of preparing the enlargements which was a contract for skill and labour, amounted to a sale. (ii) In the case of the transaction embodied in Bill No. 95198 only the contract for the supply of prints on paper of the particular size, excluding the work of developing the negative from the firm roll of the customers which was a contract for skill and labour, amounted to a sale. (iii) In the case of the transaction embodied in Bill NO. 16531, only the contract for the supply of prints of the particular size, excluding the contract for the taking of the photographs as well as the contract for the developing of the negative, which were contracts for sill and labour, amounted to a sale. 20. Their lordships noted that contracts have been divided into three broad classes (1) contracts for labour simply, (2) contracts for work and materials; and (3) contracts for goods sold and delivered. Where the passing of property was merely ancillary to the contract for the performance of work, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct a sale of goods but to enter into a bargain for rendering service which involved the exercise of the artistic skill of the photographer concerned, which required highly technical nature of the operations of a photoghraper in the matter of taking a photograph, developing the film and preparing the prints and for enlargements. On behalf of the revenue it was contended there also that the essential feature of the business of a photographer was the production of goods for sale, and that, with the advance that had been made in the manufacture of cameras, and even in the matter of the subsequent process of developing, printing and enlarging in the studio, there were very little scope for the exercise by the photographer of skill of any nature, everything being regulated by mechanical gadgets in the camera itself, or by other scientific precision processes. In that connection the learned counsel for the revenue relied on the decisions in the case of D. Masanda, M. Ghosh, B.V. Bhatta and Chelaram Hasomal. Their Lordships examined each of those cases. 23. As regards the decision in the D. Masanda's case, the Bombay High court noted that the question referred to Madhya Pradesh High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customer was the supply of finished goods and there was not a mere agreement for the exercise of skill and labour for the production of the photographs but with respect to the Patna High Court, the question as to whether the transaction which a photographer enters into with a customer is severable or not has not even been touched in the judgment in the said case." 25. Dealing with the case of D.V. Bhatta, the Bombay High Court observed that, "I fail to see how the fact as to weather a photographer surrenders the negative or regains it could make any difference in deciding upon the real nature of the transaction. Though the Madras High court has in B. Bhatta's case discussed several authorities on the point, I do not find anything in the judgment of the Madras High Court in that case by way of reasoning to commend itself to me. Moreover, in the judgment in that case by way of reasoning to commend itself to me. Moreover, in the judgment in that case also, the question as to whether the transaction was saveable or not seems to have completely escaped the attention of the Madras High Court." 26. As regards the case of Chelaram Hasomal, the Bombay High Court observed that the real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded to examine the cases of Sundaram Motors (Pvt) Ltd. vs. The State of Madras, (1958) 9 STC 687 and A.A. Jariwalal & Brothers vs. State of Gujarat, 16 STC 942 to 953. In the first case of Madras High Court observed that a mere passing of the property in the particular chattel was not decisive of the question whether the component parts of the chattel were sold or not. Therefore, whether in a particular case there is a contract of sale of materials as distinct from a pure works contract would depend upon the agreement between the parties and on proof of an intention to sell the materials as such. 30. Shelat, C.J. (as he then we summed up the legal position in A.A. Fariwala's case in the following terms:— "Thus the principles that emerge from these decisions are (i) that the question whether a contract in question is for work and labour or is a composite one, depends upon the intention of the parties and whether there is an agreement, express or implied, of sale of materials used in producing the article, in question and (2) that mere passing of property in the materials used is not enough unless the passing of such property takes place as a result of an agreement for sale." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apher and also takes into account the charges for the same which vary considerably according to the skill and reputation of each individual photographer." 34. The Sales tax authorities had come to the conclusion that the transaction embodied in the said bill No. 16531 was not severable and held the whole transaction to be contract of sale of the photograph to the customer. The Bombay High Court proceeded to say "I fail to see why the lower authorities have taken that view, in view of the fact that not only are the three activities involved in the transaction which is the subject matter of the said bill No. 16531 distinct and severable from their very nature but the charges in respect of the same are clearly ascertainable. Every photographer has his own charges for subjecting films whether taken by himself or supplied by the customers, to the process of developing into, what is called a negative, as well as for making out prints on paper of a particular quality and size. In this connection reference may be made to bill No. 95198 in the present case itself, in which the charges for developing and printing are stated separately. If the developing and printing charges are deducted fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d preparing its negative and then the final positive print for supplying the same to the customer, a photographer only undertakes a contract of work and labour and does not enter into a sale transaction. The customer while placing the order for the photograph, is not making a contract to purchase the paper, on which the photograph is impressed as such, but it comes to him merely as ancillary to the main contract of work and labour. The Bench considered the decisions of the Patna High court in M. Ghosh's case and the Bombay High Court in B.V. Bhatt's case and found themselves unable to agree with those decisions. On the other hand they agreed with the decision of the Bombay High Court in Camera House case and also agreed with the criticism by that High Court of the ratio of decision of the Madras High Court in B.V. Bhatta's case. As regards the decision in Masanda's case which had been earlier decided by Madhya pradesh High Court itself, the Bench stated that the only question referred to the High court in that case was whether the material used in preparing the photograph was taxable or not. 37. The last case is that of Tasveer Kendra vs. The State of Gujarat (1976 CTR (Guj) 52 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel." 40. In the State of Himachal Pradesh vs. Associated Hotel of India Ltd., (1972) 29 STC 474, their Lordship of the Supreme Court had an occasion to consider the decision in D. Masanda & Co., where the question was whether supply of photographic materials imported and used in the process of manufacturing photographic work, copies of which were supplied by the assessee to a customer, was a transaction involving sale of those materials. Their Lordships in terms held that was, however, a border-line case and the transaction might well be considered as one of service during the performance of which a transfer of certain materials in respect of which there was no contract for sale, either express or implied, might be said to have taken place. Reverting to photographer's, services, the Gujarat High court observed that the same were inherently individual services of value to an individual and rendered by an individual professional man, as the whole service wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essence professional services by an individual to an individual, their contract is of a highly subjective type, which could never by any stretch of imagination be treated as a contract of sale of materials and not of the essential professional services of the photographer". 41. Their Lordships also considered two foreign cases which influenced the decisions of the High Courts. One of them was Bsabinson vs. Greaves (1935 All E.R. 835) and the other was the Federal CIT vs. Bilay (1935 53 STR 69). In the first case the Court held the contract of an artist to pain the portrait of a lady as the contract of work and labour and materials supplied but not as contract for the sale of goods. As regards the other case, the Gujarat High Court found that it was the reasoning of the dissenting Judge Evatt. J., which had appealed to the Supreme Court as pointed out in the decision of Associated Hotels where their Lordships characterised D. Masanda's decision as a border line case as it was also possible to hold such photographer's contract as a works contract where the sale of material was only incidental. Therefore, it is obvious that the Riley ratio is so far as the majority took the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk and labour and not liable for sale tax. The Gujarat High Court, also in its later decision has distinguished its earlier decision in Chelaram's case and has held that such transaction was severable and upto the stage of taking photograph, developing and preparing the negative and first print, it was contract not of sale but of work and labour. The Bombay High Court has also taken a similar view. Therefore, so far as there three High Courts are concerned their decisions do not support the view expressed by the learned CIT. 45. The Patna High court's decision in M. Ghosh's case, the Madras High Court's decisions in B.V. Bhatta's case and Easter Photo Studio's case and the Orissa High court's decision in Orient Photo Art Studio's case have been critically and exhaustively examined by the Gujarat High Court in its detailed judgment in the case of Tasveer Kendra and dissented from. Some of those cases have also been discussed carefully by the Bombay High Court in Camera House's case in which it has been pointed out that the Patna, Madras and Orissa High Courts did not take into consideration the decision of the Supreme Court in the case of Gannon Dunkerley an have not also consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him and he gives it to a professional photographer for putting it through a chemical process commonly known as developing the firm. The firm after being developed, becomes a negative and in this process the photographer provides his labour and uses certain chemicals. It is evident that up to this stage there is no question of there being any sale of goods because the photographer works on the material supplied to him by his client and returns the same to him after processing it." 48. Thus according to the learned CIT himself developing and preparing of negative is not a sale as in this process, the photographer provides his labour and uses certain chemicals. The Bombay High Court in the case of Camera House has held that the work and labour of the photographer in developing the photograph in negative is not leviable to sales tax. No distinction can validly be made between the developing and printing of film roll of the customers and in developing and printing of the negatives of the photograph taken by the photographer himself and if according to the learned CIT himself, up to the stage of developing and printing of negatives, there is no transaction of sale, this part of the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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