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1954 (10) TMI 38
Whether the fact of the repeal of the Ordinance being followed by reenactment would make the provision of section 6 of the General Clauses Act inapplicable to the present case?
Held that:- The provisions of section 6 of the General Clauses Act will, in our opinion, apply to a case of repeal even if there is simultaneous enactment unless a contrary intention can be gathered from the new enactment. The result is that the appeal is allowed and the judgment of the High Court set aside. Appeal allowed.
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1954 (10) TMI 37
Whether the appellants could claim any fundamental right under article 19(1)(g) of the Constitution which can be said to have been violated by the impugned legislation?
Whether the Act has deprived them of any ’property’ which would attract the operation of article 31 of the Constitution?
Held that:- Appeal allowed. The Australian Constitution indeed has no provision like article 19(1) (g) of the Indian Constitution and it is certainly an arguable point as to whether the rights of individuals alone are dealt with in article 19(1) (g) of the Constitution leaving the freedom of trade and commerce, meaning by that expression ’only the free passage of persons and goods’ within or without a State to be dealt with under article 301 and the following articles.
We have thus indicated only the points that could be raised and the possible views that could be taken but as we have said already, we do not desire to express any final opinion on these points as it is unnecessary for purposes of the present case. The result is that in our opinion the appeals should be allowed and the judgment of the High Court set aside A writ in the nature of mandamus shall issue against the respondents in these appeals restraining them from enforcing the provisions of the U. P. State Road Transport Act, 1951, against the appellants or the men working under them.
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1954 (10) TMI 36
Issues Involved:
1. Interpretation of Section 6 of Ordinance XVIII of 1950 regarding the examination of by-products containing soda ash.
2. Whether utilization of soda ash makes it liable to taxation.
3. Legality of the assessment made on the price of soda ash utilized.
4. Validity of the assessment order passed by the Sales Tax Officer.
5. Taxability of utilized soda ash based on the sale or supply of by-products.
Issue-wise Detailed Analysis:
1. Interpretation of Section 6 of Ordinance XVIII of 1950:
The Sales Tax Tribunal sought clarification on whether Section 6, read along with the proviso to sub-section (3), rule 1, mandates the Sales Tax Officer to examine the quantity of by-products containing soda ash sold or supplied by the opponents. The Court inferred that the Tribunal's order necessitates the Sales Tax Officer to assess the quantity of by-products sold or supplied to others. However, since the Court held that soda ash utilized in manufacturing by-products is not liable for sales tax, this question does not arise, and no opinion was expressed.
2. Whether Utilization of Soda Ash Makes it Liable to Taxation:
The Court agreed with the Tribunal's view that mere utilization does not make soda ash liable to taxation; rather, it is the selling or supplying that attracts tax liability. The Court emphasized that a sale requires two parties, and a supply similarly necessitates a bilateral transaction. Therefore, utilization by the manufacturer himself does not amount to a supply within the meaning of the Ordinance and should not be taxed.
3. Legality of the Assessment Made on the Price of Soda Ash Utilized:
The assessment made by the Sales Tax Officer included the price of soda ash utilized for purposes other than those mentioned in the registration certificate. The Court held that such utilization does not amount to a supply that could be taxed. Consequently, the assessment was not lawfully made.
4. Validity of the Assessment Order Passed by the Sales Tax Officer:
The assessment order was challenged on the grounds that it was not in accordance with the provisions of law. The Court affirmed that the order should be set aside since the utilization of soda ash in the manufacture of by-products does not amount to a taxable supply.
5. Taxability of Utilized Soda Ash Based on the Sale or Supply of By-products:
The Court concluded that soda ash utilized by the opponents in manufacturing their own by-products cannot be taxed. The proviso to rule 1 of sub-section (3) of section 6 comes into operation only if such utilization amounts to a supply liable to tax, which is not the case here.
Conclusion:
The Court answered the questions referred by the Tribunal as follows:
1. No opinion expressed as the question does not arise.
2. In the affirmative.
3. Assessment was not lawfully made.
4. First part in the affirmative; second part in the affirmative.
5. Soda ash utilized in manufacturing own by-products cannot be taxed.
Reference Answered Accordingly.
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1954 (10) TMI 35
Issues:
1. Validity of rule 63 under the East Punjab General Sales Tax Act, 1948.
2. Reopening of assessment made under section 11(4) of the Act under rule 63.
Analysis:
1. The judgment deals with the assessment of Messrs. Vishwa Nath and Sons under the East Punjab General Sales Tax Act, 1948. The assessing authority initially assessed the dealer without the production of account books. Subsequently, a further notice was issued for reassessment under rule 63, leading to an enhanced assessment. The Assistant Excise and Taxation Commissioner held that the assessing authority could not reopen an assessment made under section 11(4) of the Act. The State challenged this decision before the Financial Commissioner, raising the issues of the validity of rule 63 and the authority to reopen assessments under section 11(4).
2. The court analyzed the provisions of rule 63, which allows the assessing authority to review its previous orders after fresh inquiry. The court questioned the State Government's power to make such a rule, arguing that the power to review orders should be explicitly provided in the Act itself, similar to the Indian Income-tax Act. The court emphasized that legislative policy essentials cannot be provided for in rules unless specifically delegated by the legislature. It held that proceedings under the Sales Tax Act are judicial, and assessments can only be reopened in strict accordance with the Act, citing precedents from similar circumstances.
3. The court noted that the respondent's counsel conceded that if rule 63 was valid, assessments could be reopened under the rule. However, the court ultimately dismissed the petition for revision, emphasizing the lack of explicit authority for the State Government to introduce a rule allowing the reopening of assessments made under section 11(4) of the Act.
4. In conclusion, the court dismissed the petition for revision, indicating that orders should be issued accordingly. The judgment highlights the importance of adherence to legislative provisions and the limitations on the power of subordinate authorities to review assessments without explicit legislative authorization.
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1954 (10) TMI 34
The High Court of Orissa allowed the petition in revision against an assessment order by the Collector of Commercial Taxes. The petitioner was granted a rebate on the amount of Rs. 1,35,028-4-0, representing goods transferred between branches, as it was not a taxable sale under the Sales Tax Act. The assessing officer failed to consider this evidence, leading to the petition being allowed.
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1954 (10) TMI 33
Issues:
Interpretation of Section 11 of the Travancore-Cochin General Sales Tax Act, 1125 regarding collection and payment of sales tax. Determination of whether the amount collected by the petitioner from customers on sales outside the State, not attracting sales tax, should be paid over to the Government. Examination of whether the collection made by the petitioner was a precautionary measure and if the amounts collected should be refunded if no tax liability accrued.
Analysis:
The petitioner, a dealer in gunny bags and vegetables, challenged the assessment by the Sales Tax Officer, where he was directed to pay an amount collected from customers on sales outside the State. The petitioner contended that he should not be liable to pay sales tax on such sales outside the State under Section 286(1)(a) of the Constitution of India. The appellate order highlighted that the collections made by the petitioner were on behalf of the State and should be paid over to the State where the goods were delivered. The High Court held that the tax collected by the petitioner falls under the provisions of the Travancore-Cochin General Sales Tax Act, dismissing the appeal (1).
The judgment referenced a Supreme Court decision stating that the State where the goods are delivered for consumption is entitled to the sales tax. The court emphasized that the tax collected by the petitioner, even before the Supreme Court judgment, should be paid over to the State, as held in a previous High Court case (2). The court rejected the argument that the tax collected was beyond the Act's provisions, stating that the appellant was authorized to collect sales tax under Section 11 of the Act (1).
The court acknowledged a similar decision by the Madras High Court but declined to adopt its conclusion. It held that any amount collected by the petitioner from customers, whether actually due as sales tax or not, must be handed over to the State under the Act's provisions. The court emphasized that the petitioner's collection was considered a tax collection under the Act (2).
The court noted the petitioner's argument that the collection was a precautionary measure and should be refunded if no tax liability arose. It highlighted that this aspect was not considered by the Appellate Assistant Commissioner, leading to a quashing of the order for a fresh determination on this issue. The court directed a reevaluation of whether the collection was made solely as a precautionary measure and if it constituted a collection "by way of tax" under the Act (2).
In conclusion, the original petition was allowed partially, with the matter remanded for further consideration, without any order as to costs (1).
(1) [1954] 5 S.T.C. 58
(2) [1954] 5 S.T.C. 382
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1954 (10) TMI 32
Issues:
1. Liability of a managing director of a company for failure to pay sales tax.
2. Interpretation of personal liability of directors in a limited liability company for taxes.
3. Applicability of statutory provisions in enforcing personal liability for taxes.
4. Relevance of specific sections of the Madras General Sales Tax Act and Criminal Procedure Code in determining personal liability.
Detailed Analysis:
1. The judgment revolves around the liability of the petitioner, a managing director of a company, for failure to pay sales tax for a specific year, as per the Madras General Sales Tax Act. The petitioner was charged with an offense under section 15(b) of the Act for not paying the due sales tax amount, despite a notice served. The defense that the tax was already collected from their agents was rejected, leading to the petitioner's conviction and sentencing. The issue at hand was the imposition of personal liability on the managing director for the arrears of tax, which the petitioner contested.
2. The judgment delves into the interpretation of personal liability of directors in a limited liability company for taxes. It distinguishes between a firm and a company with limited liability, emphasizing that individual partners in a firm may be personally liable for debts, unlike members of a limited liability company. The legal analysis highlights that the liability of members in a limited liability company is restricted to the amount payable on their shares, and there is no personal obligation on directors for the company's debts or taxes, as per the Indian Companies Act.
3. The analysis further explores the applicability of statutory provisions in enforcing personal liability for taxes. It references relevant legal precedents and provisions to establish that personal liability cannot be imposed on a director of a limited liability company for taxes payable by the company. The judgment underscores that taxing authorities can only proceed against the assets of the company to recover taxes, and personal liability of directors is not legally tenable unless specifically provided by statute.
4. The judgment also scrutinizes the relevance of specific sections of the Madras General Sales Tax Act and the Criminal Procedure Code in determining personal liability. It dismisses the arguments based on certain sections of the Acts, clarifying that those provisions do not support the imposition of personal liability on directors for taxes owed by the company. The legal analysis dissects the statutory framework to conclude that the petitioner, as a managing director, cannot be held personally liable for the arrears of tax, emphasizing that taxing authorities must pursue recovery from the company's assets.
In conclusion, the judgment establishes that in the context of a limited liability company, the personal liability of directors for taxes payable by the company is legally untenable, and taxing authorities must seek recovery from the company's assets rather than holding individual directors personally liable.
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1954 (10) TMI 29
Issues Involved:
1. Whether the American company had established a place of business in Great Britain.
2. Whether the service of the writ at 36 Grosvenor Street was valid under section 412 of the Companies Act, 1948.
Detailed Analysis:
1. Establishment of a Place of Business in Great Britain:
The first issue examined was whether the American company had at any time established a place of business in Great Britain, specifically at 36 Grosvenor Street. The court noted that the American company did not comply with section 407 of the Companies Act, 1948, as it never considered that it had established a place of business in Great Britain. The plaintiff's argument hinged on the duties assigned to him as the director of the company for the sterling area and his activities at 36 Grosvenor Street. However, the court concluded that the plaintiff wholly failed to show that the American company ever established a place of business within Great Britain. This finding was sufficient to dispose of the case without considering the second issue.
2. Validity of Service Under Section 412:
Despite the resolution of the first issue, the court addressed the second issue due to its significance and prior judicial consideration. The question was whether the phrase "any place of business established by the company in Great Britain" in section 412 referred to an existing place of business at the time of service or any place where the company had ever established a place of business. The court interpreted section 412 to require that the place of service must be an existing place of business at the time of service. The court reasoned that the language of section 412, "by leaving it at or sending it by post to any place of business established by the company in Great Britain," necessitated that the place of service be a place which is then established as a place of business of the company.
The court found that the other construction would lead to absurd results, such as serving a company at a former place of business where it no longer conducted any business, which would not likely bring the proceedings to the company's notice. The court distinguished the present case from Sabatier v. Trading Company, noting that the latter involved a company that had filed with the registrar of companies the name of a person authorized to accept service, which was not the case here.
The court also rejected the plaintiff's argument that applying the principles of Sabatier's case would prevent an oversea company from gaining an advantage from its own non-compliance with the Act. The court held that the mode of service under section 412 must be at an existing place of business established by the company. The court emphasized that whether a place at which service is sought to be effected is an existing place of business must depend on the facts of each particular case.
Ultimately, the court concluded that the service effected at 36 Grosvenor Street was not good service under section 412, as it was not an existing place of business established by the American company at the time of service.
Conclusion:
The court allowed the appeal and directed that an order should be made setting aside the service of the writ in this action. The judgments of the other judges concurred with the primary judgment, emphasizing that the plaintiff failed to demonstrate that the American company had carried on business in Great Britain and that the service at 36 Grosvenor Street did not comply with section 412. The court underscored the importance of ensuring that service of process is likely to come to the notice of the foreign corporation, which was not the case here.
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1954 (10) TMI 12
Whether the estimate of profit made by the Income-tax Officer was excessive or whether it was justified on the material on the record?
Held that:- Both the Income-tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It is thus a fit case for the exercise of our power under Article 136.
In the result we allow this appeal, set aside the order of the Tribunal and remand the case to it with directions that in arriving at its estimate of gross profits and sales it should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the Income-tax Officer if it is intended to make the estimate on the foot of those enquiries.
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1954 (10) TMI 11
Whether there is any evidence before the Tribunal to support the conclusion that the main purpose of the transactions was the avoidance of excess profits tax ?
Whether on the facts admitted or proved the share of income of Dr. Surmukh Singh in the firm of Ram Singh & Co., can be legally included along with the share of income of Ram Singh and Gurdayal Singh ?
Whether on the facts and circumstances of the case the leasing of machinery, etc., by the assessee firm to the company was a business within the meaning of Section 2(5) of the Excess Profits Tax Act ?
Held that:- The High Court should have, after answering question No. 3 in the negative, reframed the referred question No. 1 by restoring question No. 1 as suggested by the assessee firm in its petition and should have answered the question so restored in the negative and in favour of the assessee.
For the reasons stated above, we allow this appeal, reframe question No. 1 by restoring the first question suggested by the assessee firm, namely :--
" Whether under the facts and circumstances of the case the application of Section 10A with a view to amalgamating the income of the firms Uppal & Co., and Ram Singh & Co., with the income of the appellant firm was correct and valid in law ? "
And we answer the question so reframed in the negative. Question No. 2 must be answered in the negative and in favour of the assessee by way of necessary corollary. We also answer question No. 3 in the negative. Appeal allowed.
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1954 (10) TMI 10
Petition under Article 32 of the Constitution of India for the enforcement of fundamental rights under Articles 31(1) and 19(1)(f) of the Constitution filed
Held that:- From the facts stated above it is plain that the proceedings taken under the impugned Act XXX of 1947 concluded so far as the Investigation Commission is concerned in September, 1952, more than two years before this petition was presented in this Court. The assessment orders under the Income-tax Act itself were made against the petitioner in November, 1953. In these circumstances we are of the opinion that he is entitled to no relief under the provisions of Article 32 of the Constitution. Petition dismissed.
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1954 (10) TMI 9
Whether the Excess Profits Tax Officer was justified in splitting up the standard period as he did in order to arrive at the standard profits of the assessee?
Whether the business profits of the assessee had to be determined first under Section 10 of the Income-tax Act?
Whether the assessee was a resident or non-resident under Section 4A of the Act was to be considered after the determination of those profits?
Held that:- The Excess Profits Tax Officer was in error when he excluded the foreign profits for the assessment year 1936-37 from computation. Rule 1 of Schedule I to the Excess Profits Tax Act provides that business profits during the standard period are to be computed on the principles on which business profits are computed for purposes of income-tax under Section 10 of the Income-tax Act. Business profits under Section 10 may comprise Indian as well as foreign profits. All these profits would come within the computation of business profits and they would be determined as such in the income-tax assessment for the particular assessment year. The question whether Indian or foreign profits are greater would become relevant for determining the status of the assessee, whether he is a resident or non-resident, and would be considered later when the assessable income came to be determined.
It is only after the business profits are determined under Section 10 that the question can be considered whether the assessee is a resident or non-resident and that question can certainly not be determined unless and until the Indian and foreign profits of the assessee have been in the first instance determined under Section 10 - The decision of the Excess Profits Tax Officer was therefore wrong and the Tribunal and the High Court were right in the view they took - Appeal allowed.
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1954 (10) TMI 8
Whether on the facts and circumstances of the case the assessee was doing business in shares in the account year?
Whether there is any material on record on the basis of which it could be held that the assessee was doing the business in shares in the account year?
Held that:- both the Tribunal and the High Court were in error in the view that no issue of law arose in the case and that the Tribunal could not be called upon to state a case and to refer to the High Court any issue of law. The two questions framed by the appellant and which he wanted the High Court to ask the Tribunal to refer to it are comprehensive enough to embrace the issue of law that, in our opinion, arises out of the order of the Tribunal. But we think that it would clarify the position if these two questions were re-stated in the following form :--
" Whether the finding of the Tribunal is not vitiated by reason of its having relied upon suspicions and surmises not supported by any evidence on the record or upon partly inadmissible material ? "
Allow this appeal, set aside the order of the High Court dismissing the application of the appellant under Section 66(2) of the Indian Income-tax Act, and remand the case to the High Court
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1954 (10) TMI 7
The petitioner was assessed for tax evasion, resulting in a liability of Rs. 1,96,175. A settlement was reached with the government for payment in instalments, but the petitioner challenged the legality of the process. The Supreme Court dismissed the petition, upholding the settlement and ordering the petitioner to pay costs. (Case citation: 1954 (10) TMI 7 - Supreme Court)
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1954 (10) TMI 6
Petition under Article 32 of the Constitution of India filed
Held that:- Petition is wholly misconceived. Whatever tax the petitioner has already paid, or whatever is still recoverable from him, is being recovered on the basis of the settlement proposed by him and accepted by the Central Government. Because of his request for a settlement no assessment was made against him by following the whole of the procedure of the Income-tax Act In this situation unless and until the petitioner can establish that his consent was improperly procured and that he is not bound thereby he cannot complain that any of his fundamental rights has been contravened for which he can claim relief under Article 32 of the Constitution. Article 32 of the Constitution is not intended for relief against the voluntary actions of a person. His remedy, if any, lies in other appropriate proceedings. Appeal dismissed.
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1954 (10) TMI 5
Whether Section 5(1) of Act XXX of 1947 infringes Article 14 of the Constitution inasmuch as it is not based on a rational classification ?
Whether, after the coming into force of the Indian Income-tax (Amendment) Act, 1954, which operates on the same field as Section 5(1) of Act XXX of 1947, the provisions of Section 5(1) of Act XXX of 1947, assuming they were based on a rational classification, have not become void and unenforceable, as being discriminatory in character ?
Held that:- Assuming the provisions of Section 5(1) of Act XXX of 1947 could be saved from the mischief of Article 14 of the Constitution on the basis of a valid classification, that defence is no longer available in support of it after the introduction of the new sub-section in Section 34 of the Income-tax Act, which sub-section is intended to deal with the same class of persons dealt with by Section 5(1) of the impugned Act. The result is that proceedings before the Investigation Commission can no longer be continued under the procedure prescribed by the impugned Act. We therefore direct that an appropriate writ be issued against the Commission prohibiting it from proceeding further with the cases of these petitioners under the provisions of Act XXX of 1947
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1954 (10) TMI 4
The Supreme Court allowed the appeal regarding the assessment of profits for the years 1945-46 and 1946-47, remanding the case to the Tribunal with similar directions as in a previous judgment. The Income-tax Officer's additions to the profits were reduced to Rs. 14,00,000 in 1945-46 and Rs. 14,10,000 in 1946-47. The gross profit rates were adjusted to about 28% on enhanced sales for both years.
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1954 (10) TMI 3
Whether the revised assessments for the chargeable accounting periods 1941, 1942 and 1943 are liable to be cancelled an the ground that the Excess Profits Tax Officer erred in invoking the provisions of section 15 of the Excess Profits Tax Act?
Held that:- Having regard to the nature and scope of the provisions of the Excess Profits Tax Act and in particular section 26 (3), we are of opinion that the word " discovers " in section 15 of the Act is of sufficient amplitude to take in subsequent events which have a material bearing on the facts and circumstances on which assessment had been made or relief granted, and that when the Excess Profits Tax Officer finds that an assessee to whom relief had been granted under section 26(3) has utilised the buildings, plant or machinery in business after the termination of the war, he is entitled to proceed under section 15 of the Act. Appeal dismissed.
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1954 (10) TMI 2
Whether 60% of the dividend amounting to ₹ 2,750 received by the assessee from the two tea companies is agricultural income and as such exempt under section 4(3) (viii) of the Act?
Held that:- It is true that the agricultural process renders 60% of the profits from land which is used for agricultural purposes exempt from tax in the hands of the company but can it be said that when such company decides to distribute its profits to the shareholders and declares the dividends to be allocated to them, such dividends in the hands of the shareholders also partake of the character of revenue derived from land which is used for agricultural purposes? Such a position if accepted would extend the scope of the vital words " revenue derived from land " beyond its legitimate limits.
The policy of the Act as gathered from the various sub-clauses of section 2(1) appears to be to exempt agricultural income from the purview of the Income-tax Act. The object appears to be not to subject to tax either the actual tiller of the soil or any other person getting land cultivated by others for deriving benefit therefrom, but to say that the benefit intended to be conferred upon this class of persons should extend to those into whosoever hands that revenue falls, however remote the receiver of such revenue may be, is hardly warranted. Appeal dismissed.
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1954 (10) TMI 1
Whether the profits on the sale of goods to the Government of India accrued or arose in British India?
Whether the profits on the sale of goods through the company's paid employees in British India accrued or arose in British India?
Held that:- The High Court was in error in giving the directions it did to the Tribunal. It moreover abjured its advisory function and asked the Tribunal not to submit to it any further statement of the case but to dispose of the matter according to law and in accordance with directions given by it. This in our opinion the High Court was not entitled to do.
We therefore allow the appeal, quash the order made by the High Court and direct that the Tribunal do submit to the High Court a further statement of the case in regard to questions 1 and 2 which were referred by them to the High Court. Appeal allowed.
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