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TMI Blog1992 (5) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1 pays rent for site or premises for the period of lease to the landlords and leases out the right to use the hoardings to different companies for a certain period of time. The company possesses the right to use the hoarding or immovable structure for advertising their products and pays rent to the applicant No. 1 monthly or periodically in terms of the lease agreement. As the applicant No. 1 receives the rent for these immovable structures, it cannot be assessed to sales tax. The further case of the applicants is that the applicant No. 1 received a notice dated March 13, 1985, under section 14(1) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the Act of 1941" for the sake of convenience) whereby the applicant No. 1 was directed to see the respondent No. 1, the Commercial Tax Officer, Alipore Charge, on May 27, 1985 with all books of accounts for examination for determining the liability to pay sales tax under section 4(2) of the Act of 1941. The matter was adjourned on several dates and was fixed for hearing on January 16, 1986. On that date (January 16, 1986), the respondent No. 1 passed an order that it was found from the books of accounts and documents prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 5(1)(ccc) of the Act of 1941. By that order dated December 17, 1990, the respondent No. 1 further directed the issuance of notice in form VII. A notice in form VII was, accordingly, issued and was received by the applicant No. 1. The applicants have prayed for a declaration that no tax is payable under section 5(1)(ccc) read with section 2(g)(ii) and 2(d) of the Act of 1941 on the lease rent received by the applicant No. 1 against immovable property. The applicants have also prayed for a direction on the respondents to drop the assessment proceedings for the subsequent periods on declaration that the notices in form VI for the years ending on May 31, 1984 and May 31, 1985, are illegal. 3.. The case of the respondents, as transpiring from an affidavit-inopposition sworn in by Shri Atanu Majumdar, Commercial Tax Officer, Alipore Charge, is that the applicant No. 1 is liable to pay tax as letting out of hoarding, etc., amounts to sale, as defined in section 2(g)(ii) of the Act of 1941. It is alleged that upon a preliminary scrutiny of the books of accounts of the applicant No. 1, the predecessor-in-office of Shri Atanu Majumdar was of the opinion that the applicant No. 1 might h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant No. 1 as movable goods, the rent receivable from houses, buildings, shops, sheds or other immovable properties would have been subjected to sales tax under section 2(g)(ii) of the Act of 1941. When the rents receivable from houses, buildings, shops, etc., are not subjected to sales tax, the rent or premium received by the applicant No. 1 for leasing the immovable structures for advertisement cannot be taxable under the Act of 1941. The contention of the Revenue, on the other hand, is that the letting out of hoardings, etc., for the purpose of advertisement, by the applicants, to any person, company, firm or agency amounts to "sale" as defined in section 2(g)(ii) of the Act of 1941 and that the hoardings and the structures constructed by the applicant No. 1 are movable properties. To dispose of these rival contentions it is necessary to reproduce some of the relevant sections of the Act of 1941. 6.. Pursuant to the definition of "tax on the sale or purchase of goods" in the Constitution of India to include a tax on the "transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and tenant or between mortgagor or mortgagee has no application in India. In this country, the maxim, whatever is affixed to the soil becomes part of the soil, has also a limited application in view of the following definition of "goods" in section 2(7) of the Sale of Goods Act, 1930: "2(7) 'goods' means every kind of movable property other than actionable claims and money; and includes stocks 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." To get rid of subtleties, the sole test laid down in the Sale of Goods Act appears to be whether the thing attached to the land has become by agreement goods, by reason of the contemplation of its severance from the soil. The applicants have in the affidavit-in-reply filed copies of several agreements entered into by the applicant No. 1 with the landlords and by the applicant No. 1 with several companies to whom the hoardings or other structures erected by the applicant No. 1 are leased out for specific periods. In the affidavit-in-reply the applicants have also filed some photographs showing the hoardings set up by the applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other erections made by the applicant No. 1 for leasing them out to persons or companies for advertisements of their products are "goods" and not immovable properties. It is to be stated in this connection that entry 54 of List II in the Seventh Schedule to the Constitution speaks of taxes "on the sale or purchase of goods other than newspapers, subject to the provision of entry 92A of List I". The word "goods" in this entry 54 of List II means the "goods" as defined the section 2(7) of the Sale of Goods Act, 1930, read with the definition of the word "goods" in section 2(d) of the Act of 1941, in view of the decision of the Supreme Court in the case of State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353. It was decided by the Supreme Court in the aforesaid case of Gannon Dunkerley [1958] 9 STC 353 that the expression "sale of goods" in entry 48 in List II of Schedule VII of the Government of India Act, 1935, could not be construed in its popular sense but must be interpreted in its legal sense and should be given the same meaning which it has in the Sale of Goods Act, 1930. The case of Gannon Dunkerley [1958] 9 STC 353 (SC) was a case under the Madras General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is stated in the affidavit-in-reply that the applicant No. 1 goes on offering the terms and conditions for leasing out the hoardings and permanent structures to the esteemed customers for user of such hoardings and structures for the purpose of advertisements of their products and that the applicant No. 1 charges lease rental or monthly rental in terms of the agreement for a specific period of time. The case in the affidavit-in-reply is that when such specific period expires, the term is either extended or determined and the permanent structure is made available to other new customers for use for the purpose of advertisement. Copies of the two specimen filled-up contract forms entered into on December 7, 1989, with Messrs. Dunlop India Ltd. and on April 7, 1989 with Messrs. Modi Rubber Ltd., which have been annexed with the affidavit-in-reply, show that these contract forms are nothing but contracts for lease of the hoardings for some specified period. There is nothing to show in these contract forms that possession and control of the hoardings and structures remained with the applicant No. 1 during the periods specified in the contract forms. Both the parties agreed to engage the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tened to or embedded in the earth. I have already shown that the hoardings and structures are movable properties and are "goods" within the meaning of section 2(7) of the Sale of Goods Act, 1930. In the circumstances, on the authority of the decisions of the cases reported in [1988] 70 STC 215 (AP) (State Bank of India v. State of Andhra Pradesh) and [1987] 67 STC 199 (Cal) (Bank of India v. Commercial Tax Officer) it cannot be at all stated that the applicant No. 1 would not be subjected to sales tax for leasing out the hoardings and structures to the customers. 10.. The case of Modern Decorators v. Commercial Tax Officer [1990] 77 STC 470; [1990] 23 STA 151 was decided by this Tribunal. My two learned brothers are parties to that judgment. One of the questions for determination in that case was whether hiring of pandals erected by decorators at the instance of customers for a specific period would come within the meaning of "sale" of goods, as defined in section 2(g)(ii) of the Act of 1941, after the Forty-sixth Amendment of the Constitution of India. The decision of this Tribunal in that case was that the services rendered by decorators in erecting pandals or rostrums would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch enquiry as he may think necessary and after giving the dealer an opportunity of being heard shall fix the date on and from which such dealer shall become liable to pay tax under sub-section (2) or (4)." 12.. The "taxable quantum" in the case of the applicant No. 1 means Rs. 2,00,000 under section 4(5)(d) of the Act of 1941. The contention of Mr. Sen is that in order to make a dealer liable to pay tax on the basis of section 2(g)(ii), it is first to be determined that the dealer has a turnover exceeding Rs. 2,00,000 and thereafter the dealer is to be made liable to pay tax under section 4(2) of the Act of 1941. The order of the respondent No. 1 dated January 16, 1986, only showed that the dealer might be liable to pay sales tax with effect from April 1, 1984. As no liability to pay tax under section 4(4a) of the Act of 1941 was thereafter determined, Mr. Sen has contended that the notices in form VI received by the applicant No. 1 should be held to be illegal. The contention of the learned State Representative, on the other hand, is that the absence of determination of liability to pay tax under section 4(4a) of the Act of 1941 is at best an irregularity, when liability to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal Act, 1987. Subsequently, on November 18, 1991, when the case was next argued, Mr. Sen did not press the point of limitation. In the circumstances, the question of limitation in the matter of passing of the ex parte order of assessment on December 17, 1990, is not being discussed. 14.. As the matter stands, there would be no declaration that no tax is payable by the applicant No. 1, under section 5(1)(ccc) read with section 2(g)(ii) and section 2(d) of the Act of 1941, on the rent received by the applicant No. 1 on leasing out hoarding and structures to different persons or companies for advertising their products. The ex parte order of assessment dated December 17, 1990 should not, however, be allowed to stand as there is nothing to show in that order as to on what basis the taxable balance was found out to be Rs. 1,50,00,000. The order of assessment does not also show as to whether this taxable balance was in respect of the entire year ending on May 31, 1984 or was for only two months from April 1, 1984 to May 31, 1984. As already stated, the provisions of section 2(g) of the Act of 1941, defining the word "sale" after the Forty-sixth Amendment of the Constitution came i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In deciding this question, the hoardings should be treated as "goods" and the letting out of such hoardings should be deemed to be sale in the facts and circumstances of the case. If it is decided by the respondent No. 1 that there is liability of the applicant No. 1 to pay sales tax on this account during these periods, the assessment proceedings should be gone through; otherwise, the assessment proceeding or proceedings should be dropped. The application is, accordingly, disposed of. Interim order passed by this Tribunal on May 28, 1991 is vacated. No order is made as to costs. 16.. P.C. BANERJI (Technical Member).-I have carefully perused the judgment drafted by the learned Chairman. With due respect I find it difficult to agree to some of the conclusions and propositions enunciated therein. In particular, the methodology adopted in interpreting "goods" as defined in the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the BFST Act") does not appear to be in keeping with the accepted principles of statutory construction. In fact, this is a crucial aspect, which is the root cause of our differences of opinion. On the question whether the structure and the hoarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nothing prevented the State Legislature from defining "goods" in terms of the Sale of Goods Act, which it was constitutionally competent to do. Though it had the power it did not exercise it to that extent. It is the prerogative of the Legislature to exercise whatever power it has and also to decide to what extent it would exercise such power. In its wisdom it gave a restricted definition in the State Act and did not enlarge it to the extent of the definition in the Sale of Goods Act. 21.. Looking at it from this angle, we have to interpret the definition of "goods" in the BFST Act, which will govern this case. The relevant definition given in section 2 of the BFST Act is reproduced below: "2. Definitions.-In this Act, unless there is anything repugnant in the subject or context,- .............. (d) 'goods' includes all kinds of movable property other than actionable claims, stocks, shares or securities." Since there is no definition of "movable property" in the Act we have to refer to the Bengal General Clauses Act, 1899. The relevant definitions therein are reproduced below: "Movable property" shall mean property of every description except immovable property. "Immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... longing to individual owners. There is, however, no dispute that these buildings where the hoardings are put are immovable properties. Similar is the case with the structures, which are embedded in, and attached to, the earth. The agreement with the owners as well as the Corporation indicates that it is either in the nature of a lease or licence to let out the ground/outer wall/portion of roof, etc., for setting up and displaying advertisement boards of specific sizes for a specified period on payment of a specified fee. The applicant-company has the option to sub-let the board to its customers on such terms as it thinks fit. 26.. The structures and advertisement boards are put up by the advertising agency at its own cost and removed on the expiry of the term of the lease/licence. In the case of the Corporation the structures, etc., would vest/revert to the Corporation of Calcutta. The advertising company in its turn leases out the right to use the hoardings of those structures to different companies for a certain period of time within the period of lease/licence. The company possesses the right to use the hoarding or the structure for displaying its products and pays rent to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Moreover, in the case of Calcutta Corporation the structure, on determination of the licence, vests in it and is not removed. 30.. It clearly emerges from the facts that the iron and steel framed structure with masonry base and the hoarding or advertisement board fastened to it are different entities. It is the hoarding, which is let out by the applicant. The hoarding is fastened to the steel structure, which is attached to the earth and which is an immovable property. Unless the hoarding is found to be permanently fastened to the said structure it cannot be claimed that it is an immovable property. It is the case of the applicant that the steel sheet or aluminium sheet, which is used as advertising board, is permanently fixed to the structure embedded in the earth. It is, however, the finding of the Commercial Tax Officer in his impugned order that the hoarding is not permanently fastened but is only temporarily fixed to the structure in such a way that it can be taken down or replaced at a very short notice. This finding is in conformity with the facts disclosed in the affidavits. It is really in the nature of trade fixtures, which are generally removable without material i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic period constitutes sale as defined in section 2(g)(ii) of the BFST Act. It is thus a dealer and is liable to pay tax if it fulfils the conditions laid down in section 4(2) read with section 4(5)(d) and section 5(1)(ccc) of the BFST Act. 33.. The next ground of challenge is that there has been no determination or fixation of the liability to pay tax and that the impugned assessment for the year ending May, 1984, has been made without ascertaining such liability. Mr. Sen argued that section 4(2) of the BFST Act is the charging section indicating the levy or incidence of tax and unless the dealer exceeds the taxable quantum as indicated in section 4(5)(d) liability to pay tax will not arise in this case. He further argued that since section 2(g)(ii) came into force from April 1, 1984, turnover of sales effected with effect from that date only can be taken into consideration while fixing liability to pay tax. He, however, conceded the point that such fixation of liability can be made either under section 4(4a) before assessment or in the course of assessment proceedings under section 11(2). He contended that as determination of liability under section 4(2) has not been made in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him to the effect that on the facts of this case, the hoardings, which were let out by the applicant to different customers for the purpose of displaying their advertisements, are movable property and therefore, goods. In my opinion, apart from making a fresh determination of liability of the applicant to pay tax on sales effected from April 1, 1984 onwards, the assessing officer (1) should also determine whether the hoarding in each transaction is goods and if it is found to be goods, (2) then he should also determine whether having regard to the terms of the contract, the transaction in question amounts to a "sale" within the meaning of clause (g) of section 2 of the Bengal Finance (Sales Tax) Act, 1941, the relevant portion of which is reproduced below: " 'sale' means any transfer of property in goods for cash or deferred payment or other valuable consideration, and includes- (i) ...................... (ii) any transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration, or" 38.. In other words, I agree with the honourable Chairman and the honourable Technical Member that the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66(12), and the expression is defined in the Sale of Goods Act, 1930, for the present purpose we are required to follow the definition of "goods" given in section 2(d) of the Bengal Finance (Sales Tax) Act, 1941, which says that "goods" includes all kinds of movable property other than actionable claims, stocks, shares or securities. I agree with honourable Mr. P.C. Banerjee, Technical Member, that the interpretation should be confined to the definition given by the State Legislature in the 1941 Act, because it indicates the limits which the Legislature has consciously chosen to impose on its exercise of power under entry 54 of List II and article 366(29A)(d). It may be mentioned here that the definition of "sale" in section 2(g)(ii) of the said 1941 Act is in full conformity with article 366(29A)(d) of the Constitution. 42.. The fundamental legal position being as above, the letting out of hoardings by the applicant-company will be exigible to sales tax under the Bengal Finance (Sales Tax) Act, 1941, if the following conditions are fulfilled: (i) The transaction must be a "sale" within the definition in section 2(g), (ii) In order to be a sale, there should be a transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not, in my opinion, be given excessive importance. Nor should undue emphasis be attached to the capability or possibility of a structure or hoarding of being removed. Because, even a building with concrete roof can be removed by demolition. A structure of bamboos and straw, or a cottage made of earthen walls and thatched roof can be removed in a short notice. Yet, those structures cannot surely be termed as "goods" so that letting them out would attract sales tax. In law, it is quite well-known that leases of lands are granted with a stipulation that on expiry of the term of lease the structures or buildings constructed on the leasehold land should be removed by the lessee. Such a removal clause is meant to restore the land to its former condition. Sometimes, the stipulation is that the lessee would vacate the land on the expiry of the term of lease leaving the structures and buildings raised on the land by him. In either case, the structures and buildings do not cease to be immovable property merely due to such clauses in the lease deed. Therefore, the crucial and determining factor is whether the hoarding is of such a nature that it is removable without causing damage to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oints involves determination of certain questions of fact and requires examination of the terms of contracts between the owner of the land or building and the applicant, and also between the applicant on the one hand and its customer on the other in each transaction. I am not satisfied that the assessing officer undertook such determination and examination. 47.. Accordingly, I allow the application and set aside impugned assessment order dated December 17, 1990 and send back the matter to the concerned Commercial Tax Officer, respondent No. 1, with a direction to determine afresh the applicant's liability to pay tax and then, if necessary, to make a fresh assessment order or orders in accordance with law and according to the directions and observations made in my judgment. ORDER BY THE TRIBUNAL: In accordance with the opinion of the majority, the application is allowed in part. The impugned ex parte order of assessment dated December 17, 1990 is set aside with a direction on the Commercial Tax Officer, the respondent No. 1, to initiate fresh proceedings to decide the question of the applicants' liability to pay tax under section 4(2) read with section 4(5)(d) of the Act of 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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