TMI Blog1951 (11) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... hese appeals came up for hearing before the Full Bench and the Court delivered the follow- ing judgment. APPEAL NO. 365 OF 1947.-P. Somasundaram and N.C.V. Rama- nujachari, for the appellant. The Government Pleader (P. Satyanarayana Raju) for the res- pondent. APPEAL NO. 447 OF 1947.-N.C.V. Ramanujachari, for the appellant. The Government Pleader (P. Satyanarayana Raju) and C. Vasudeva Mannadiar, for the respondents. APPEAL NO. 641 OF 1947.-The Government Pleader (P.Satya- narayana Raju) for the appellant. C.V. Dikshitulu, for the respondents. APPEAL No. 468 OF 1947.-P. Somasundaram and M. Nagaramayya, for the appellant. The Government Pleader (P. Satyanarayana Raju) and K.N. Karu- nakaran, for the respondents. APPEAL NO. 551 OF 1947.-P. Somasundaram and N.C.V. Rama- nujachari, for the appellant. The Government Pleader and K.N. Karunakaran, for the res- pondent. The Advocate-General (V.K. Thiruvenkatachari) appeared with The Government Pleader in all the cases. JUDGMENT The judgment of the Court was delivered by RAJAMANNAR, C.J.-These appeals have been posted before a Full Bench because of a conflict of opinion between Division Benches of this Court (Provinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (i) defines "turnover" thus: " 'Turnover' means the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, tenant or otherwise, shall be excluded from his turnover; Explanation: Subject to such conditions and restrictions, if any, as may be prescribed in this behalf: (i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof; (ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and (iii) where for accommodating a particular customer a dealer obtains goods from another dealer and immediately disposes of the same to the said customer, the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former." Section 3 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. The plaintiffs in all the suits carry on independent business of their own and also commission business. Every one of them has obtained a licence under Section 8 of the Act. The licences granted to them are in the following form: FORM NO. 5. Licence under Section 8 under Madras General Sales Tax Act of 1939. See rule 6(5). Whereas having their place of business in have paid to him a licence fee of Rs. 10 in words (ten rupees only) a licence is hereby granted under Section 8 of the Madras General Sales Tax Act of 1939 subject to the provisions of the said Act, subject to the rules made thereunder and subject to the following conditions: 1. The licence holder shall submit to the undersigned as before the last day of every month, a return in form No. 6 for the previous month. 2.. The licence holder shall be exempt from the tax payable under Section 3(1) of the Madras General Sales Tax Act of 1939, only to the extent to which the goods bought or sold through him are included in the turnover of the principals or in the turnover of the dealers from whom purchases were made. 3.. This licence shall not apply to the transactions of the licence holder carried on otherwise than for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncreased in some cases. These amounts which were collected by the plaintiffs from the buyers were admittedly not passed on to their sellers though the rusums did find a place in the accounts of the plaintiffs and it is said that the plaintiffs had included these amounts in their turnover. It is common ground that there is no secrecy about this charge and the argument pro- ceeded before us on the footing that this custom of commission agents collecting rusums from the buyers at a particular rate and appropriating them was well established and the sellers either actually knew or must be deemed to have known of this usage. The case of the Government shortly is that the plaintiffs have been obtaining in these transactions a further benefit than the agreed commission or brokerage. From another point of view also there has been a violation of the conditions of the licence because the amounts collected by the plaintiffs as rusums really must be deemed to be part of the price of the goods and these amounts were not included in the turn- over of the seller principals as part of the price. The plaintiffs met these charges by pleading firstly that these amounts ought not to be added to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the evidence which related to this part of the case by counsel at the bar. On the whole the impression left on me as a result of the evidence is that these amounts were not considered by any party, either the seller or the buyer or the commission agent, as part of the price. In effect the evidence is that the commission agent obtained a remunera- tion both from the seller and the buyer and this was in accordance with the mercantile usage. It is as if the agreement between the parties was that the commission agent should get a particular amount from the seller and another amount from the buyer as his commission. There is nothing either in the decision in Province of Madras v. Sivalakshmi- narayana(1), or in the decision in Government of Madras v. Veerabhadrappa(2), to preclude us from holding that the rusums must be treated as part of the agreed commission. Govinda Menon, J., was of the opinion that if the commission agent collected rusums openly and not clandestinely, then the rusums should be deemed to be part of the agreed commis- sion. The learned Judge observed: "It is therefore clear that in collecting an amount designated rusums the commission agents were really collectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seller of goods in respect of one and the same transaction. But it is a matter of notoriety that the practice is deeply rooted in many places and several trades. The licence issued to the plaintiffs in this case, which we have perused, does not prevent such a mode of earning brokerage or commission." It must therefore be held that the plaintiffs in these cases have not violated the conditions of the licences granted to them under Section 8 of the Act. The next question and by far the more important one is assuming that the plaintiffs have violated the conditions of the licences and therefore were not entitled to exemption under Section 8 of the Act whether they would be liable to the tax as dealers. This question appears to us to be a mixed question of fact and of law and not a mere question of law. It is therefore necessary to ascertain the nature of the business transacted by the plaintiffs as commission agents. It was indeed common ground and amply supported by the evidence that the plaintiffs were acting as agents for several seller principals who entrusted them with goods for sale at specified prices. Though these principals were known to the plaintiffs, they really, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be said to buy or sell his goods on his own behalf, any more than a marriage broker who brings the parties together can be said to be a party to the marriage.' " The facts in Public Prosecutor v. Narasimha Reddy(2) were also similar to the facts in Government of Madras v. Veerabhadrappa(1). Chandrasekhara Aiyar, J., referred to the accused in the case as having acted as a broker or commission agent who brought the seller and the buyer together. He pointed out that the word "turnover" as defined was not appropriate to what is done by an agent "in the way of bringing together a buyer and a seller for brokerage or a commission." On the facts found in Public Prosecutor v. Narasimha Reddy(2), and Government of Madras v. Veerabhadrappa(1), there can be no doubt whatever that the merchants in those cases do not fall within the definition of "dealer". They themselves neither sold nor bought the goods. They simply brought the seller and the buyer together and received a brokerage or commission by way of remuneration for their (1) (1951) I.L.R. 1951 Mad. 257; 1 S.T.C. 245. (2) (1947) 2 M.L.J. 220; 1 S.T.C. 167. trouble. It does not appear that the plaintiffs in those cases were entrus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties is for the consignor to treat such a consignee as creditor for his advances and interest and to regard him as a debtor for the amounts received and interest." In Blackwood Wright's Law of Principal and Agent this case is cited as authority for the position that a commission agent is not (1) [1950] 1 S.T.C. 245. (2) 43 L.T. 171. bound to keep separate accounts at his bankers, for he is not a fiduciary agent and the moneys he receives are his own; and by the custom of trade he is only liable as debtor to his employer for the amounts received -(see 2nd Edn., p. 189). That in spite of the parties supposing their relationship to be that of principal and agent, in point of law it may be different as well illustrated by the case of Ex parte White, In re Nevill(1). In Kalyanji v. Tikaram(2), the legal position of a commission agent is very fully discus- sed by Vivian Bose, J., (as he then was). The course of business found in that case was as follows. The plaintiff was a merchant who dealt in the purchase and sale of grain and cotton seed. The defend- ants were also merchants who acted as commission agents in respect of those commodities. The arrangement between them was this: Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing a given quantity of cotton seed or grain look beyond them to these other persons resident else- where or deal with them otherwise than as principals in their own behalf. The customer in such circumstances can scarcely be expected to ask or know or even care who is the owner of each handful of grain he purchases; in fact, it may well be that the commission agents themselves do not know once they have brought the grain from their godowns and mixed it with other stock which is being retailed in their shops; nor would the principals care who these purchasers are. Their contracts are with the commission agents and ordinarily no privity is established between the principals and the ultimate purchasers. In general there is nothing to prevent these commission agents from purchasing the commodities themselves at the price named by their principals and then selling thereafter at a profit to themselves. This profit they would be entitled to retain. A mere agent could not do that. Looking then to the general dealing between the parties in this case, looking to the fact that these conditions are the usual conditions upon which commission agents operate and to the fact that the defend- ant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion agent, the accepted mercantile practice is that he has control over or possession of the goods and he has the authority from the owner of the goods to pass the property in and title to the goods. If this is so, undoubtedly when a commission agent sells goods belonging to his principal with his authority and consent and without disclosing to the buyer the name of the owner, there is certainly a transfer of pro- perty in the goods from the commission agent to the buyer. A business which consists in such transactions can properly be described as a busi- ness of selling goods. A similar position would arise even in the case of a commission agent buying for an undisclosed principal. A commission agent doing this kind of business would, in my opinion, fall within the definition of dealer in the Sales Tax Act. Neither the definition of dealer nor of sale contemplates as a necessary condition, that the goods sold should belong to the person selling or buying. There can be a sale or purchase on behalf of another. Now I shall briefly deal with the two decision which are alleged to contain conflicting opinions. In Province of Madras v. Sivalakshmi- narayana(1), the point did not arise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods on behalf of some one else, even then it will not be inaccurate to say that he buys and sells goods. The learned Judge seeks to receive sup- port for his view from Explanation 2 which includes within the defini- tion the agent of a person resident outside the Province who carries on the business of buying and selling goods in the Province. I do not think that the Explanation throws any light on the point in issue. The reference in the Explanation is presumably to an agent of a person who carries on business qua agent of that person who however is resid- ing outside the Province. Now it is well known and it was admitted by counsel before us that the plaintiffs in the cases before us though (1) (1951) I.L.R. 1951 Mad. 257; 1 S.T.C. 245. they describe themselves as commission agents, do not purport to be agents of any particular person or persons. Some of them admittedly get goods from as many as 100 principals. It will be opposed to facts to say that they are carrying on business as the agent of these persons. In the case of an agent who carries on business professedly as an agent of another then it is really the principal who can be deemed to be carry- ing on the business and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to taxation. If that assumption falls to the ground, as shown already, there is no need really for the exemption." In another place he opines that Section 8 was intended to cover transactions of accommodation contemplated by Explanation (4) to the definition of turnover in the Act. In my opinion, though it is true that Section 8 is not a taxing section, yet occurring as it does in the same enactment, it must be read as throwing some light on the other related provisions and in view of the fact that there is nothing in the definition of dealer to indicate that the buying or selling must be on the person's own account, the obvious inference from Section 8 is that the definition would cover also the case of persons mentioned in Sec- tion 8 who would, but for that section, be liable to taxation under Sec- tion 3. The other learned Judge also came to the conclusion that an agent can in no event be included in the definition of a dealer. But there are observations in his judgment which appear to me to be not inconsistent with the view I am taking. I do not for a moment differ from him when he says "a broker or commission agent who merely brings together the buyer and seller does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of vendor and purchaser is correct law. All that we are concerned with in this case is to determine whether the plaintiffs in these cases would be dealers, i.e., persons engaged in the business of buying or selling goods. I do not therefore propose to deal at any length with either the decision in Ireland v. Livingston(1) or Cassaboglou v. Gibb(2). In my opinion, the learned Judges in Government of Madras v. Veerabhadrappa(3) went too far in holding that in no event and under no circumstances can a commission agent be deemed to be a person carrying on the business of buying or selling goods and I must express my respectful dissent from them. In my opinion, the plaintiffs in these cases would be dealers within the meaning of that expression in the Act and liable to tax under Section 3 but for the exemption given by Section 8. As I have held that the conditions of the licence granted under Section 8 have not been infringed, the plaintiffs will be entitled to the exemption. All the suits will therefore be decreed. In the result, Appeals Nos. 365, 468, 551 and 447 of 1947 will be allowed and Appeal No. 641 of 1947 will be dismissed. There will be decrees as prayed for. The plaintif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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