TMI Blog1952 (3) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on the sale of goods in the Province of Madras." The following definitions in Section 2 are important. "(b) 'dealer' means any person who carries on the business of buy- ing or selling goods. Explanation (2).-The agent of a person resident outside the Pro- vince who carries on the business of buying or selling goods in the Pro- vince shall be deemed to be the dealer in respect of such business for the purposes of this Act." "(c) 'goods' means all kinds of movable property other than actionable claims, stocks and shares and securities and includes all materials, commodities and articles; "(h) 'sale' with all its grammatical variations and cognate expres- sions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred pay- ment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge: Explanation.-A transfer of goods on the hire-purchase or other instalment system of payment shall notwithstanding the fact that the seller retains the title in the goods as security for payment of the price, be deemed to be a sale." "(i) 'turnover' means the aggregate amount for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch business [Section 14(1)]. Sec- tion 14(2) provides for inspection of accounts and registers, goods, offices, shops etc. In exercise of the powers conferred by sub-section (2) of Section 3 of the Act rules were framed called the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. Rule 6(2) provided that every dealer commencing business after the first day of October, 1939, whose estimated net turnover for the first twelve months of his business is not less than Rs. 10,000 shall, within 30 days of commencing his business submit to the assessing authority of the area in which his principal place of business is situated a return in Form A1 showing his estimated gross turnover and the net turnover for the first 12 months of his business. Rule 6(3) ran thus: "Every dealer commencing business who has not submitted a return under sub-rule (2) but whose turnover reaches Rs. 10,000 within the first 12 months of the commencement of the business, shall, within 30 days of the day on which his turnover reaches Rs. 10,000 submit to the assessing authority of the area in which his principal place of business is situated a return in Form A1." Rule 11(1) is in the following terms: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to submit a return of his turnover in British Cochin and that the provisions of the Madras General Sales Tax Act did not apply to dealers whose place of business was situated outside the Province of Madras unless there was an agent in the Province. He therefore, disclaimed any liability to submit a return of his turnover or to pay any tax under the Madras General Sales Tax Act. These objections were overruled and the Deputy Com- mercial Tax Officer by his order dated the 24th March, 1947, held that the appellant was liable to be assessed on a net turnover of Rs. 12,30,124 for the year ending 31st March, 1946, and called upon him to pay a sum of Rs. 12,301-4-0 within 21 days. The plaintiff filed an appeal to the Commercial Tax Officer of Malabar at Calicut against this order of assessment and raised the same contentions. But the Commercial Tax Officer confirmed the order of the Deputy Commercial Tax Officer by his order dated the 22nd May, 1947. The appellant then took the matter in revision to the Board of Revenue, but his petition was rejected by the Board by its order dated the 20th Octo- ber, 1947. Thereupon the appellant filed the present suit making more or less the same al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an English statute, is applicable only to English subjects or to foreigners who by coming into this country,whe- ther for a long or short time, have made themselves during that time subject to English jurisdiction." In our opinion, from this rule of law which is certainly well esta- blished it does not follow that one who is not a resident of a State can escape from or evade the imposition of taxes by the particular State if the necessary requirements are fulfilled which would justify the levy of a tax. In Whitney v. Commissioners of Inland Revenue(2), the facts were these. The appellant, a citizen of the United States of America and having possessions in the United Kingdom from which he derived a large income, was required by the Special Commissioners for Income Tax to make a return of his income for the purposes of super-tax. Having fail- ed to make the return he was assessed by the Commissioners to the best of their judgment. It was held by the House of Lords that the assess- ment was rightly made. The statute of any country imposing a tax on the profits earned by a person in transactions which take place within the State is not inconsistent with the rule of international l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hink, clear upon the authorities that where, as in the present case, the freight-earning contracts with shippers which enable profits to be earned by sea carriage are not entered into at the port in question by the ship's master or the local agent of the ship- owner, but elsewhere, the ship-owner cannot be held to exercise his trade at the port, merely because he employs a shipping agent there to attend to other matters, such as issuing shipping orders and signing bills of lading pursuant to contracts already made and receiving pay- ment of advance freight." (1) (1919) 42 Mad. 455. (2) [1896] A.C. 325. (3) [1908] A.C. 46. Napier, J., formulated the test thus: "In this class of cases if the contract out of which the profit arises is not made in the place where the tax is sought to be imposed, the liability does not arise." In Municipal Council, Dindigul v. Bombay Co. Ltd.(1), the principle laid down in Municipal Council, Cocanada v. The "Clan" Line Steamers Ltd.(2) was followed. The plaintiff company in that case which had its chief place of business in Madras purchased produce such as cotton and groundnuts through its agent in Dindigul. Contracts in respect of such purchases we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should say that whenever profitable contracts are habitually made in England, by or for foreigners, with persons in England, because they are in England, to do something for or supply something to those persons, such foreigners are exercising a profitable trade in England, even though everything to be done by them in order to fulfil the contracts is done abroad." In that case it was held that though the principal place of business of the company was at Copenhagen they carried on business also in Eng- land, because the contracts were made with the company in England. In Werle Co. v. Colquohoun(1), the facts were these. A firm of wine merchants at Rheims in France employed a London firm to obtain orders for their wine in England. They had no wine in England, and all orders were forwarded to Rheims and the wine was packed and sent direct from thence to the customers. Payments were made direct to the firm or to the London firm who remitted the amount to the firm at Rheims. It was held that the firm at Rheims exercise a trade within the United Kingdom and were therefore assessable to income-tax in respect of profits arising therefrom. The test enunciated in Erichsen v. Last(2) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by cheques which were encashed in banks in British India. In these circumstances it was held by a Special Bench consisting of Wallis, C.J., and Ayling and Krishnan, JJ., that the profits and gains arising through these transac- tions were assessable under the Indian Income-tax Act. In the light of the above authorities let us see the facts of this case. The contracts of sale were made in Fort Cochin. The plaintiff or his son was present in Fort Cochin and executed the contracts. The delivery of the goods was undertaken to be given in the yards of the respective buyers who are all carrying on business in Fort Cochin. On these facts we have no hesitation in holding, agreeing with the learned trial Judge, that the plaintiff must be held to be a person who carries on the business of buying or selling goods in the State of Madras and therefore a dealer within the meaning of Section 2(b) of the Act. The sales tax, as observed in Province of Madras v. Boddu Paidanna Sons(4), is a tax levied on the occasion of the sale of goods. The sale must be deemed to have taken place in Fort Cochin which is part of the State of Madras. The appellant was therefore rightly assessed under the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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