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Pohari Saran Mishra Versus Commissioner Commercial Tax

2016 (11) TMI 841 - ALLAHABAD HIGH COURT

Valuation - 'turnover' as defined under the U.P. Trade Tax 1948 - whether the freight charges which are stated to have been levied and recovered by the revisionist from the purchaser of goods was liable to be included in its taxable turnover? - Held that: - the Tribunal found that in terms of clause 10 of the contract, the supply was to be effected at the railway siding. In terms of clause 11, the responsibility and ownership of the stone ballast remained that of the supplying contractor. In ter .....

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transported to and measured at the railway siding. It records that the responsibility and ownership of the ballast while in transit remained with the assessee. There was thus no transfer of property in goods at the time of they being put into transit. The freight charges were therefore charges which clearly came to be incurred by the revisionist in order to complete the bargain and a charge which was incurred "at the time of or before the delivery thereof" of the goods. The cost of freight which .....

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counsel. The short question which arises for determination in this revision is as to whether the freight charges which are stated to have been levied and recovered by the revisionist from the purchaser of goods was liable to be included in its taxable turnover. The answer to this question itself would turn upon the expression 'turnover' as defined under the U.P. Trade Tax 1948 which reads as under: - "2. (i) 'Turnover' means the aggregate amount for which goods are supplied .....

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ng done by the dealer in respect of the goods sold, at the time of or before the delivery thereof, other than, cost of freight or delivery or cost of installation or the amount realized as trade tax on sale or purchase of goods, when such cost or amount is separately charged; (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 par .....

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ounsel for the revisionist, the charge of freight in this case was levied separately and is therefore not liable to be included in the taxable turnover of the assessee. He lays stress uponthe express language employed by clause (i) to the effect that the cost of freight "when separately charged" is to be excluded from the taxable turnover. On the other hand, Sri B.K. Pandey, learned standing counsel has submitted that all costs which are incurred by the dealer prior to the sale achievi .....

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Meters Limited Vs. State of Tamil Nadu (2010) 9 SCC 423. Their submissions have centered around what the Supreme Court observed in paragraphs 16, 17, 18 & 19 of the report and which for the sake of appreciation of the controversy is extracted hereinbelow: - 16. It is no doubt true that Rule 6(c) of the Rules permits deduction of the cost on freight while determining the taxable turnover. However, that provision must be read in the context of definition of "turnover" as also the def .....

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erson to another in the course of business for cash, deferred payment or other valuable consideration". The definition goes on to include a number of other transactions also within that definition of "sale". The turnover of an assessee/dealer would include the aggregate amount for which goods are bought or sold. It is, therefore, the amount for which the goods are bought or sold, which form part of the turnover, and a thing can be said to be sold only when the transaction falls wi .....

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e scope of "turnover". 19. The learned counsel for the State of Tamil Nadu submitted that freight and insurance charges are included in the sale price of the goods. Even if freight and insurance charges are shown separately in the Bill and added to the price of the goods, the character of payment would remain the same. Since freight and insurance charges represent expenditure incurred by the dealer in making the goods available to the purchaser at the place of sale, they would constitu .....

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r are sold. Explanation II while delineating the various items which are liable to be included or excluded while computing taxable turnover in clause (i) provides that 'turnover' would mean the amount for which goods are sold or purchased including the price of packing material and any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof. While the first determinative factor is the price, packing material and 'any sum .....

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be included in the taxable turnover would therefore have to be answered with reference to all expenses which a dealer does incur for effecting and completing the sale. This is evident from the use of the phrase 'at the time of or before the delivery thereof'. This would indicate that all expenses that the dealer incurs in order to complete the transaction of sale and before the transfer of property in the goods takes place are liable to be included in the taxable turnover. As one reads t .....

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that there was an obligation on the dealer to make the goods available at the place of sale. The latter part of sub clause (i) which employs the words "when such cost or amount is separately charged" is dealing with and is liable to be restricted to those class of transactions where the obligation to transport the goods to the place of the purchaser is not an essential facet of the transaction of sale. It must necessarily be interpreted to apply to those cases where the transportation .....

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n is the terms and conditions of the sale and the essential obligations attached to the bargain. The fact that freight or other like charges are shown separately in an invoice or bill cannot be decisive of the issue whether these charges are liable to be included in the taxable turnover or not. For the purposes of determining the issue much would turn upon the terms of the contract as well as the intention of the contracting parties. As noted above, the issue would have to be answered bearing in .....

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