1963 (8) TMI 35 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of license fee on a commission agent under section 6 of the Mysore Sales Tax Act, 1957.
2. Interpretation of provisions under sections 5 and 6 of the Act regarding liability to pay tax or license fee.
3. Applicability of license fee based on the turnover of the commission agent's principals.
4. Determining the extent of liability of the agent in relation to the liability of the principals under the Act.

Analysis:
The judgment of the High Court of Mysore dealt with the issue of assessing a license fee on a commission agent under section 6 of the Mysore Sales Tax Act, 1957. The petitioner, a commission agent, had obtained a license under section 11 of the Act for the year in question. The Commercial Tax Officer assessed the petitioner's turnover and imposed a license fee under section 6, which was upheld in subsequent appeals. The petitioner contended that no tax was leviable on him under section 6. The court analyzed the relevant provisions, including section 11, which requires a commission agent to obtain a license for specified transactions. Proviso (i) of section 11 establishes that an assessment on the agent is made for and on behalf of the principal, provided the principal is liable to pay tax. The court emphasized that if the principal cannot be taxed for the transactions, the agent also cannot be taxed for the same.

The court further examined section 5 of the Act, which exempts dealers with a turnover below a specified limit from paying tax. Cereals were exempt from taxation under section 6, but a license fee was applicable. The court clarified that the license fee under section 6(2) is considered a tax. It concluded that if the principals were not liable to pay the license fee due to their turnover being below the prescribed limit in section 5(5), the agent cannot be held liable for the fee. Section 6 was deemed ancillary to section 5, and the limit in section 5(5) should govern the license fee payable under section 6(2).

The court rejected the taxing authorities' view, stating that holding the agent liable for the fee when principals would not be liable creates an anomalous situation. It emphasized that the agent's liability is co-extensive with that of the principals under the law of agency and the Act. The court held that the license fee imposed on the petitioner was without legal authority and quashed the assessment order, issuing a writ of certiorari. The respondents were directed to pay the petitioner's costs, including the advocate's fee. The judgment clarified the agent's liability under the Act and the correct interpretation of sections 5 and 6 regarding the imposition of tax or license fee based on turnover limits.