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TMI Blog1955 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, and this business is run by the Chief Forest Officer of the Jeypore Samasthanam. The officer holds a Dealer's Registration Certificate, No. KO-434 and pays sales tax under the Act. In addition he has also entered into certain contracts with business- men for the extraction and manufacture of railway sleepers. He was called upon to get himself registered as a dealer by the Sales Tax Authorities in respect of these contracts entered into by the Samas- thanam with sleeper contractors. The Chief Forest Officer disputed his liability to taxation in respect of these transactions and, under protest, took out a Registration Certificate No. KO-960. For the assessment quarter ending 31st December, 1947, he has been taxed on a taxable turnover of Rs. 30,584-8-3, and for the quarter ending 31st March, 1948, his gross turnover has been determined by the Department at Rs. 2,49,222-6-5 and the proportionate taxable turnover has been determined by the Department as amounting to Rs. 2,44,257-8-0. The petitioner went up in appeal to the Collector and thereafter in revision to the Revenue Commissioner, but without success. The Revenue Commissioner has made the above reference to this Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company's challan and the departmental permit. Then comes clause 4 which authorises the company to fell marked trees and convert them into broad gauge, meter gauge and narrow gauge sleepers as economically as possible. Clause 5 permits the company to saw the scantlings and other small timber as an experiment for one year. Clause 6 is intended to enable the company to carry out its work under the agreement in a systematic manner and expeditiously, and the company is to abide by such rules as may from time to time be made by the Chief Forest Officer for regulating fellings in the leased area. Clause 7 is an important condition of the agreement. It says that the company shall work the forest in an economical manner and on sylvicultural principles for extraction and supply of sleepers and scantlings as aforesaid and the company shall pay to the Maharaja the following royalties: broad gauge-27 per cent. of the selling price; meter gauge-20 per cent. of the selling price; narrow gauge-20 per cent. of the selling price; and scantlings other than those sold to the railways-30 per cent. of the selling price of the company. The selling price is the price paid by the Sleeper Control Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of all accounts in connection with the work showing (a) the number of trees felled during the month, (b) the stock or converted sleepers at the commencement of the month, (c) sleepers converted during the month, and (d) the balance in stock at the close of the month. By clause 26 the company is prohibited from transferring or sub, letting any of the rights and privileges granted by the agreement with- out the prior consent, in writing, of the Chief Forest Officer having been obtained. Clause 30 says that in the event of circumstances arising outside the control of the company rendering the working of the forest areas impossible or totally unprofitable to the said company, and should the company under those circumstances express its desire to abandon its work under the contract, it may be permitted to do so on giving one month's notice in, writing to the Chief Forest Officer on payment of the minimum royalty for a period of one year. The view taken by the Sales Tax Authorities is that the transac- tions embodied in the contract amount to a sale of sal timber, as a minimum royalty has been reserved under the contract, and that the Maharaja is a "dealer" as he has entered into s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "sale price" of the timber sold. That expression is defined as "the amount payable to a dealer as a valuable consideration for the sale or the supply of any goods". (1) (1847) 10 Q.B. 178. (2) (1943) A.I.R. 1943 P.C. 153; 11 I.T.R. 513. In Income-tax Commissioner, Bombay v. Metro Goldwyn Mayer (India)Ltd.(1), the Bombay High Court had to consider an agreement between the Culver Corporation of New York and Messrs. Metro Goldwyn Mayer (India) Ltd. In that case the relationship between the two com- panies was constituted by a contract which defined the parties as "vendor" and "vendee" the non-resident being called the vendee. The vendor sold to the vendee the sole and exclusive rights of re-selling, exhibiting, leasing, and otherwise exploiting, in motion picture productions controlled or purchased by the vendor. The vendee under- took to provide an efficient sales-force and had to pay 70 per cent. of the takings to the vendor. Beaumont, C.J., held that the arrangement between the parties was something in the nature of a "licence" and "certainly not, in my opinion a sale out and out". The view taken by the Sales Tax Department, therefore, that the contract, in the present case, is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trees. I have already referred to the two Forms, II and III, which indicate that a person is not to be regarded as a dealer unless he buys and sells. Section 15 of the Orissa Sales Tax Act deals with accounts and says that every registered dealer shall keep a true account of the value of goods bought and sold by him, and the Collector is empowered to require the dealer by notice in writing to keep such accounts. Section 16 em- powers the Collector to require the dealer to produce before him any accounts relating to the stocks of goods, or of purchases, sales and deliveries of goods by the dealer. These provisions make it clear that a dealer is required to keep an account of the value of goods bought and sold by him. Since, admittedly, the Maharaja does not buy either timber or sleepers it must be held that he is not a "dealer" as contemplated in the Act. In a similar case relating to sale of paddy grown by an assessee on his lands, the Patna High Court held that the appellant was not a dealer within the meaning of the Bihar Sales Tax Act as he was not carrying on any business of selling agricultural produce or goods in Bihar. See Raja Visheswar v. The Province of Bihar(1). Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of the word "tea" occurring in the Travancore General Sales Tax Act. Yet another case to which our attention was invited is reported in Vaidyanatha Ayyar v. The State Madras(5). There the assessee converted the sugarcane grown by him into jaggery under a process of manufacture and sold the jaggery. It was held that he was carrying on the business of selling jaggery and was, therefore, a dealer. None of these cases has any bearing on the question raised in the present case. It was finally argued that the Maharaja was carrying on the business of selling through his agents, viz., Messrs. Dear and Co., Ltd., and was, therefore, liable to be taxed. It was urged that a liberal interpret- ation should be given to the definition of the word "dealer" and the petitioner should be held liable to tax. This argument is an argument of despair and runs counter to the well-recognised principle laid down by Lord Sumner in Levene v. Commissioners of Inland Revenue(6), that: (1) (1930) A.I.R. 1930 Mad. 764. (4) [1954] 5 S.T.C. 348. (2) [1954] 5 S.T.C. 128; A.I.R. 1954 Mad. 954. (5) [1954] 5 S.T.C. 94. (3) [1954] 5 S.T.C. 273. (6) [1928] A.C. 217. "A taxing statute must impose a charge in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meaning of the Orissa Sales Tax Act. I am satisfied that the Act does not apply to the facts of this case and that the transactions evidenced by the agreement do not constitute (1) [1936] A.C. 1, at p. 24. (3) [1903] A.C. 299. (2) (1869) 4 H.L. 100 at p. 122. (4) [1940] 8 I.T.R. 522. sale of goods. Our answers to the questions referred to us, therefore, are: (1) The Maharaja of Jeypore is not a dealer under clause (c) of sec- tion 2 of the Orissa Sales Tax Act. (2) The royalty payable under the agreement constitutes "income" and not "sale price" of the goods sold. Questions (3) and (4) referred to us do not call for decision and we offer no opinion on them. The petitioner is accordingly entitled to a declaration that the tax levied upon his transactions is not justified by the provisions of the Orissa Sales Tax Act, and the tax, if paid, shall be refunded to him. The petitioner shall also have the costs of this application which we assess at Rs. 250. NARASIMHAM, J.-I agree with the order proposed by my Lord the Chief Justice. The principal question which is sufficient for the disposal of this reference is whether on the admitted facts of the case the petitioner can be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In V.S. Sundaram's Law of Income-tax (Edn. 7 at pages 81 and 83) are given the following meanings of the expression based on several English authorities: "'Business' has a more extensive meaning than the word 'trade' but ordinarily speaking 'business' is synonymous with 'trade'. In Smith v. Anderson(1), Jessell, M.R., after citing definitions of 'business' from several dictionaries said 'anything which occupies the time and attention and labour of a man for the purpose of profit is business'." Again, "'trade' in its largest sense is the business of selling, with a view to profit, goods which the trader has either manufactured or himself purchased, per Lord Davey." Hence it is reasonable to hold that the expression "business of sell- ing goods" occurring in section 2(c) of the Orissa Sales Tax Act means "the business of selling, with a view to profit, goods which the dealer has either manufactured or himself purchased from some other person for resale." Admittedly, the zamindar of Jeypore did not purchase the sleepers from some other person. Nor did he manufacture them himself or through his agent. The Patna decision on the Bihar Sales Tax Act, Raja Visheshwar v. The Provin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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