TMI Blog1974 (6) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... p rates to the members to raise funds to advance loans at cheap rates especially for the needs of farming to the members. Bye law 2(3) provided for the activity of purchasing on commission of agricultural implements, household goods, etc., for the members of the society, non-members and others working in the area of the operation of the society and to sell the same to them through shops. Bye-law 2(4), which is material, authorised the society to sell on commission the crops of members and of members of other co-operative societies functioning in the area of the society and to sell products of village industries. Bye-law 8 provides that every member was bound to sell his crop in excess of the needs of his family through the society and that a failure to observe the rule made him liable to fine up to Rs. 50. Bye-law 44(2) authorised the managing committee to take up goods for sale and if necessary and possible to grade the same. Byelaw 54(6) provided that every member obtaining such loan should sell all his agricultural produce through the institution nominated or selected by the society for the purpose. The society recovers these loans and outstandings from the sale proceeds. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his was a business activity, the Tribunal must give a finding relating to the volume, frequency, continuity and regularity of the transactions. It was also pointed out that it was necessary for the Tribunal to determine the question as to whether the society was making any profit by the sale of the goods of the members. Therefore, additional statement of facts was called for relating to the volume, frequency, continuity and regularity of the transaction of sale and as to whether the society was making profit. Accordingly the Tribunal has furnished the additional statement of facts by pointing out that the groundnut crop in the year of assessment was supplied by 137 members which had been sold by auction in the year of assessment. Once the auction was held after due public notice but the price offered for both the types of groundnuts being not upto the mark, no final sale was made in the first auction. In the second auction, the sale price in question was realised. Therefore, there was only one sale transaction of groundnuts in the assessment year effected by the society. The total commission charged from the members was Rs. 470 at the rate of five paise per maund. The price of one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 542 (S.C.); A.I.R. 1973 S.C. 376., their Lordships upheld the definition of "dealer" in section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, in so far as it included an auctioneer. At page 259 their Lordships pointed out that an auction sale, in view of the provisions of section 4 read with section 64 of the Sale of Goods Act, would have to be considered to be a sale for the purpose of the Sale of Goods Act. There is nothing in entry 48 of List II of the Seventh Schedule of the Government of India Act and entry 54 of List II of the Seventh Schedule of the Constitution which restricted the power of the legislature in the matter of the imposition of sales tax to the levy of such tax on the owner of the goods on whose behalf they are sold or the purchaser only. Their Lordships in terms held that where the transaction is one of sale of goods as known to law, the power of the legislature to impose a tax thereon, was plenary and unrestricted, subject only to any limitation which might have been imposed by the Government of India Act or the Constitution. In view of the wide amplitude of the power of the State or Provincial Legislature to impose tax on transactions of sale of goods, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law relating to co-operative societies in the Presidency of Bombay. Therefore, the twofold objective of that Act was to provide for self-help for members of the society and for the mutual help to Its members. Their Lordships considered the various bye-laws and pointed out that they clearly indicated that the society was selling produce of others and not its own goods. Its duty is to arrange to sell the agricultural produce of its members. The members were only entrusting the goods to the society and not selling them to the society. Therefore, the bye-laws were interpreted as an agency agreement under which the goods came Into the hands of the society for sale or for their management through the society. The members had authorised the society to pool their goods, grade them if necessary, and sell them after ginning or without ginning. The price fetched was then distributed among the members whose goods were sold. It was, therefore, held that, in these circumstances, the society was the agent of its members. Because of the various bye-laws, several members must be deemed to have appointed the common agent, the society, for disposing of the goods in a manner most advantageous to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive. By the use of the expression "profit-motive", it was not intended that profit must in fact be earned. Nor did the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicated a motive which pervaded the whole series of transactions effected by the person in the course of his activity. In actual practice, the profit-motive might be easily discernible in some transactions; in others, it would have to be inferred from a review of the circumstances attendant upon the transaction. To infer from a course of transactions that it was intended thereby to carry on business, ordinarily the characteristics of volume, frequency, continuity and regularity indicating an intention to continue the activity of carrying on the transactions must exist. Their Lordships pointed out that no test was decisive of the intention to carry on the business. Such an inference could not be ordinarily raised when the mill was selling fixed assets or discarded goods acquired in the course of business which were surplus or unserviceable. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant facts which are to be considered in such an integrated activity for drawing proper legal inference as to whether this was a business activity carried on with a profit-motive or not. Therefore, Mr. Mody could hardly characterise this perverse additional finding as a finding of fact for this purpose. Mr. Mody next argued that the society's business was primarily of money-lending. In advancing this contention Mr. Mody ignores the whole scheme of the Co-operative Societies Act. The society is not a moneylending institution in the sense in which Mr. Mody uses the term. The society is a financing institution which finances its own members for raising crops so that those crops could be conveniently and economically sold at an advantage by the society as common agent. The sale transaction, which is ultimately entered into by the society, is on its own behalf and it is wholly Irrelevant that ultimately the balance of the sale proceeds may be distributed among the members who had brought their goods in the common pool. The society may return the surplus sale proceeds to the members but that does not mean that the transaction of sale was without any profit-motive. The profit-motiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety which was held to make profit on the sale on the ground that it was wholly irrelevant how the society dealt with the profit because it distributed the profit amongst the members in accordance with the bye-laws. Therefore, in the facts and circumstances of the case, the society was held to be a dealer in that case. We are in complete agreement with this view which is in accordance with the settled law that in such a case the profit-motive could be inferred from the commercial or business character of the integrated activity of the society. It would be ignoring all realities to treat the activity of the society as a separate money-lending activity when it was with the sole aim to finance the business of sale of groundnuts with the necessary profit-motive. Mr. Mody rightly did not argue that this was a case of casual sale. Mr. Mody merely argued that the selling activity was only an incidental activity, which was not the business of the society, for, according to him, the business of the society was the money-lending activity. As earlier pointed out, the whole contention is founded on a complete misconception as to the total or integrated activity of the society and ignoring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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