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The State of Andhra Pradesh Vs. Bayya Subba Rao and Company - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberTax Revision Case No. 24 of 1958
Judge
Reported in[1960]11STC545(AP)
AppellantThe State of Andhra Pradesh
RespondentBayya Subba Rao and Company
Appellant AdvocateThe Second Government Pleader
Respondent AdvocateK. Ranganathachari, Adv.
DispositionPetition allowed
Excerpt:
- - 8. before relief could be claimed under this government order, two conditions have to be satisfied: 402 dated 2nd july, 1954. if really the word 'person' was intended to cover firms as well as co-operative societies as defined in 'dealer',the issue of two g. 25. to a like effect is the decision in ashalata ray v. the indian act, like the english act, avoids making a firm a corporate body enjoying the right of perpetual succession. that is the reason why the definition section contains words like 'unless there is anything repugnant in the subject or context......within its compass a firm. we may notice here the definition of 'person' as contained in the madras general clauses act, as an attempt is made to sustain the order of the appellate tribunal on the basis of this definition. section 3(22) of the madras general clauses act (1 of 1891) defines person thus :'person' shall include any company or association of individuals whether incorporated or not.10. if this definition of 'person' is read into the proper order, there will be considerable support for the proposition enunciated by the tribunal. but, could this inclusive definition be justifiably imported into the g.o. in question the definitions given in the madras general clauses act should be read into every madras act, 'unless there be something repugnant in the subject or context',.....
Judgment:

Chandra Reddy, C.J.

1. The Government of Andhra Pradesh has brought this revision case against the order of the Sales Tax Appellate Tribunal accepting an appeal of the respondent.

2. The facts material for the purpose of this enquiry may be briefly set out. The respondent is a firm running under the name and style of Messrs. Bayya Subbarao & Co., the partners thereof being Bayya Ramakrisnaiah, Bayya Subbarao and Bayya Pitchaiah. This firm was doing business in castor oil and castor cake and gingelly oil and was registered in the Commercial Tax Department as G.I. No. 5077. These brothers formed into another partnership to carry on another business under the name and style of Messrs. Bayya Ramakrishnaiah and Brothers. The two partnership firms were separately registered and taxed by the Saies Tax Department under two different assessment numbers till 1954-55. They also obtained separate licences from the municipality for running their respective businesses. Messrs. Bayya Subbarao & Co., dealt in gingelly oil which is also a produce of their hand-oil presses and pulses till 1st August, 1954. Thereafter they confined themselves exclusively to dealings in castor oil and castor cake from 1st August, 1954. The purpose for which this was done was to obtain the benefit of exemption from sales tax, under G.O. No. 402 dated 2nd July, 1954, which granted an exemption from sales tax to 'every person owning or having an interest in hand-oil presses, single or multiple and dealing exclusively in the produce of such presses, from the payment of any tax under Section 3(1) of the said Act, in respect of the turnover of such produce.' Notwithstanding the dis-continuance of the business in pulses by the respondent, the department clubbed both the firms as one unit and assessed it. Thus the exemption contemplated by the G.O. was disallowed to the respondent.

3. An appeal was filed against the assessment made by the concerned Commercial Tax Officer impeaching the validity of the assessment on the ground that the assessee, Messrs Bayya Subbarao & Co., could claim the benefit of G.O. No. 402. The Deputy Commissioner upheld the assessment in the opinion that the assessee should be treated as one and the same person as Bayya Ramakrishnaiah and Brothers, who had dealings in articles other than oil extracted with the aid of hand-oil presses and as such would not be considered to have complied with the conditions of exclusive dealing.

4. The further appeal carried by the assessee to the Sales Tax Appellate Tribunal proved successful. The Appellate Tribunal took the view that the two firms could not be said to be the same person for the reason that they were two different firms, having been separately registered under two different assessment numbers and treated as different units by the sales tax department for several years prior to 1953-54, that they obtained separate municipal licences from the municipality and that consequently they were two distinct juristic entities. It is this conclusion of the Tribunal that is impeached before us by the department.

5. The decision of the Tribunal is founded on the opinion of the Board of Revenue of Madhya Pradesh in Govindram Surajmal v. State of Madhya Pradesh 1952 Nag. L.J. 47 (wrongly assumed by the Tribunal to be that of Nagpur High Court). The reasoning of the Board appears from the following extract:-

There are two distinct shops going by the name and style of (a) Surajmal Govindram and (b) Govindram Surajmal, with separate registration certificates Nos. NM-35 and NM-50 respectively. The proprietor is the same individual Govindram Sarda. During the period for which exemption-was asked for under the old Rule 25, the shop Govindram Surajmal No. NM 35 dealt exclusively in handloom cloth, while the other shop Surajmal Govindram dealt in mill-made cloth also. The point for decision is whether the former is entitled to the exemption asked for.

6. The ratio decidendi is contained in the following words :-

It seemed to me that the decision turned entirely on the question whether the 'person' mentioned in the entry in column 3 against item 21 of the old Schedule 11 is a 'juristic person' or a 'person understood in the popular sense'. The learned counsel for the State urged that the word should be understood in its popular sense and that a 'natural person' was intended when the entry was made. The appellant's learned counsel urged the contrary view. In support of his contention, the learned counsel for the State relied also on the following passage from Maxwell's Interpretation of Statutes (page 305 of the Ninth Edition).

* * * *In applying the principles stated above one should not lose sight of what may be considered its counterpart, namely, that a taxing statute should be construed strictly in favour of the subject in case of any reasonable doubt. Taking the two together, it seems to me that by 'person' in the entry in column 3 against item 21 the Legislature intended 'juristic person' and not 'person as understood in the popular sense.'

* * * *For the reasons mentioned above, I hold that the shop known as Govindram Surajmal No. 35 is entitled to the exemption it has asked, for.

7. The point for determination in this revision case is whether the opinion of the Board of Revenue, Madhya Pradesh, which was followed by the Sales Tax Appellate Tribunal, is correct. This depends upon the true intepretation of the concerned Government Order namely, G.O. No. 402 in the light of the statutory provisions of the General Sales Tax Act.

8. Before relief could be claimed under this Government Order, two conditions have to be satisfied: (i) that the person invoking the exemption should own or have an interest in the hand-oil presses and (ii) his dealings should be exclusively of the produce of such presses. After 1st August, 1954, the respondent transferred all the business to the other firm except castor oil and caster cake business using hand-oil presses for the manufacture thereof. There is no dispute that in the assessment year the respondent-firm dealt only in the produce of such presses. Therefore, it would be entitled to exemption if it is treated as an entity distinct and separate from the other firm. In other words, it should be regarded as a person different from Bayya Ramakrishnaiah and Brothers. To put it differently, could these two firms, which consist of the same individuals, be considered as different persons for the purpose of exemption ?

9. The question for consideration is whether the word 'person' should be interpreted as comprehending within its compass a firm. We may notice here the definition of 'person' as contained in the Madras General Clauses Act, as an attempt is made to sustain the order of the Appellate Tribunal on the basis of this definition. Section 3(22) of the Madras General Clauses Act (1 of 1891) defines person thus :

'Person' shall include any company or association of individuals whether incorporated or not.

10. If this definition of 'person' is read into the proper order, there will be considerable support for the proposition enunciated by the Tribunal. But, could this inclusive definition be justifiably imported into the G.O. in question The definitions given in the Madras General Clauses Act should be read into every Madras Act, 'unless there be something repugnant in the subject or context', by reason of Section 3 of that Act. Thus, the qualifying words, 'unless there be something repugnant in the subject or context ', make it abundantly clear that it is only if there is no repugnancy between the definitions of words contained in the General Clauses Act and subject of any enactment or the context thereof, that these definitions apply. It may be incidentally mentioned that even in the absence of these qualifying words, generally they have always to be understood. In Kartick Chandra v. Harsha Mukhi Dasi A.I.R. 1943 Cal. 345 F.B., a Full Bench of the Calcutta High Court extracted the following dictum of Lord Chancellor in Knightsbridge Estates Trust Ltd. v. Byrne [1940] A.C. 613:

It is perhaps worth pointing out that the words 'unless the context otherwise requires' which we find in the Consolidation Act of 1929 are not to be found in the Amending Act of 1928. I attribute little weight to this fact, for, in my opinion, some such words are to be implied in all statutes where the expressions which are interpreted by a definition clause are used in a number of Sections with meanings sometimes of a wide and sometimes of an obviously limited character.

11. Before we proceed further to examine the precise meaning of the word 'person ', we will read the definition of 'dealer 'in the Act. 'Dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for other valuable consideration and includes-(i) a State Government or a Hindu joint family which carries on such business; (ii) any society including a co-operative society, club, firm or association which buys goods from, or sells, supplies or distributes goods to its members; (iii) any commission agent, a broker, a del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, celling, supplying or distributing goods on behalf of disclosed or undisclosed principal.''

12. It is plain that the expression 'dealer' is comprehensive enough to include a firm. This definition also makes it clear that the Legislature has made a distinction between a person and a firm.

13. Now, we will refer to Section 6 of the Act from which power to grant exemption is derived. That section is in these words :-

(1) The State Government may, by notification in the Fort St. George Gazette, make an exemption, or reduction in rate, in respect of any tax payable under this Act,-

(i) on the sale of any specified class of goods, at all points or at any specified point or points in the series of sales by successive dealers; or

(ii) by any specified class of persons, in regard to the whole or any part of their turnover. * * * *

14. This authorises the Government to give exemptions either in relation to specified class of goods or in relation to specified class of persons. Acting under this section, the Government promulgated orders giving exemptions in regard to both the categories. The various Government orders granting exemption are traceable either to Clause (i) or Clause (ii) of Sub-section (1).

15. We will now notice some of the Government Orders bearing on either kind as that will throw light on the intendment of the present G.O. In G.O. No. 300, Revenue, dated 8th February, 1951,.every dealer in handloom cloth in the State of Madras shall, with effect on and from 15th day of February, 1951, pay tax under the provisions of the said Act at the rate of one and a half pies for every rupee on his turnover of sales of handloom cloth instead of at the rate of three pies as at present.

16. Similarly, under G.O. Ms. No. 863, Revenue, dated 8th April, 1951,.every dealer in flowers, fish and mutton, whose annual turnover does not exceed twenty thousand rupees, shall pay tax under Section 3, Sub-section (1) of the said Act for each year at the reduced rates specified below :

(i) If his turnover is not less than ten thousand rupees but does not exceed fifteen thousand rupees...ninety-six rupees.

(ii) If his turnover exceeds fifteen thousand rupees but does not exceed twenty thousand rupees...one hundred and forty-four rupees.

17. G.O. No. 1471 Fin. dated 22nd March, 1954, is in these words :.the. Governor of Andhra hereby exempts, with effect on and from the 1st April, 1954, from the tax payable under Section 3, Sub-section (1) of the Act,

(1) the sales of any cloth woven on handlooms, by persons who deal exclusively in such cloth and

(2) the sales of flowers, eggs, fruits, vegetables and meat (other than potatoes, onions, coconuts and canned, preserved, dried and dehydrated fruits, vegetables and meat),

Explanation: * * * (3) the sales of fish other than canned fish.

18. These are some of the instances of exemptions that were granted by the Government by virtue of the powers conferred on them by Section:6(1) (i) of the Madras General Sales Tax Act, 1939.

19. We may now give a few illustrations of exemptions granted to a 'specified class of persons' in regard to their turnover under Section 6(i)(ii). Under G.O. No. 1323, Revenue, dated 6th May, 1953,.every person owning or having an interest in country oil chekkus, single or multiple and dealing exclusively in the produce of such chekkus (is exempted permanently) from payment of any tax under Section 3(1) of the said Act in respect of such dealings.

20. Likewise, under G.O. Press No. 2532, Revenue, dated 2nd September, 1953, the Governor of Madras hereby exempts permanently with effect on and from the 1st April, 1953,

all co-operative societies of oil producers formed solely of owners of country oil chekkus, single or multiple and dealing exclusively in the produce of such chekkus, from payment of any tax leviable under Section 3(1) of the said Act in respect of such dealings.

21. This issue of separate G. Os. in regard to persons owning or having an interest in country oil chekkus and to all co-operative societies of oil producers, is also significant in that it gives an indication as to the meaning of the word 'person' occurring in G.O. No. 402 dated 2nd July, 1954. If really the word 'person' was intended to cover firms as well as co-operative societies as defined in 'dealer', the issue of two G. Os. would have no meaning and would be redundant. Undeniably, the latter category of the G. Os. extracted above were promulgated by the Government in exercise of the powers conferred on them by Clause (ii) of Section 6 (1) of the Madras General Sales Tax Act, 1939. It should not be lightly assumed that the Government issued orders without serving any purpose. It is not also without significance that Section 6 has used two different expressions in Clauses (i) and (ii), Clause (i) being confined to sale of any specified class of goods by successive dealers, while Clause (ii) bears on any specified class of persons. This distinction is maintained by the Government in all the orders granting exemptions given either under Clause (i) or Clause (ii). In this situation, we are constrained to think that the word 'person' has only a narrow significance and not a wide one as is sought to be attributed to it.

22. It is pertinent in this context to look at the definition of 'partnership' under the Indian Partnership Act, 1932, also. Section 4 of that Act recites :

'Partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually 'partners' and collectively a 'firm' and the name under which their business is carried on is called the 'firm name'.

23. It is plain that a partnership is a collective name for individuals carrying on business jointly. It is a collection of individuals who have agreed to carry on the same business. That definition denotes that a 'partnership' or 'firm' is not equated to a 'person' because it is used as a compendious name for several individuals who have agreed to share the profits and the two expressions embody two different concepts. The general concept of partnership embodied in our system of law is that a firm is not an entity or a person.

24. There is abundant authority for this proposition. Dulichand v. Income Tax Commissioner (1956) A.I.R. 1956 S.C. 354 illustrates this rule. One of the questions that presented itself before their Lordships of the Supreme Court in that case was whether a firm could enter into a partnership with another firm or a joint Hindu family or an individual. This was answered in the negative for the reason that Section 4 of the Indian Partnership Act contemplates only natural or artificial persons and a firm is not a 'person.' Their Lordships expressed the opinion that there was no warrant for importing the definition of 'person' given in the General Clauses Act into the Partnership Act. Another instance of this principle is furnished by the decision in Seodoyal Khemka v. Joharmull Manmull (1923) I.L.R. 50 Cal. 549. Page, J., who rendered the judgment, observed that a firm was not a 'person' but it was a collective name for individuals who were members of the partnership which was neither a legal entity nor a person.

25. To a like effect is the decision in Ashalata Ray v. Society for the Protection of Children in India (1931) I.L.R. 58 Cal. 15. The problem that posed itself there was whether a charitable association, the president of which was a close relation of a minor, could be appointed as guardian of the minor. The Calcutta High Court ruled that it could not be done, because the Society could not be treated as a 'person' for purposes of Section 4, Clause (2), of the Guardian and Wards Act.

26. What emerges from the various decisions is that whether the definition of 'person' in the General Clauses Act could be incorporated into any section of an enactment depends upon whether it would be repugnant to the subject or context of a particular statute or not. So, the ultimate test is repugnancy in the subject or context of the enactment in question.

27. It was urged on behalf of the respondents that the definition of' person 'in the Madras General Clauses Act should be read into all the provisions of the Andhra Pradesh General Sales Tax Act, 1957, by reason of Section 2(2) of the latter enactment which extended the application of the Madras General Clauses Act, 1891, to the Andhra Pradesh General Sales Tax Act. We do not think that this would afford any guidance in the interpretation of the word 'person' in G.O. No. 402. It is to be noticed that Section 2(2) was inserted in the Andhra Pradesh General Sales Tax Act in 1957 and this could have no application to the instant case as the assessment related to a period prior to the passing of the Andhra Pradesh General Sales Tax Act. Presumably, this clause was added in the Act, for the reason that the legislature did not want two parallel General Clauses Acts to govern the same Sales Tax Act. Otherwise, the Madras General Clauses Act would have to govern the Andhra Pradesh General Sales Tax Act in so far as it applied to the erstwhile Andhra area while in so far as it dealt with the Telangana area, it would have attracted the Hyderabad General Clauses Act, with the result that one enactment would be governed by two General Clauses Acts, depending upon the region it is concerned with. It is to obviate this anomaly that the legislature evidently has enacted Section 2 (2) in the Andhra Pradesh General Sales Tax Act. But for this provision, the Madras General Clauses Act would have a partial application to the Andhra Pradesh General Sales Tax Act. Therefore, we cannot derive any assistance from Section 2 (2) of the Andhra Pradesh General Sales Tax Act, 1957.

28. In support of the proposition that a firm is a legal entity, reliance is placed on State v. Basdeo A.I.R. 1951 All. 44. We do not think that this ruling lends any assistance to the respondent. On the other hand, it was laid down that a firm was not an entity apart from the persons constituting it. Their Lordships of the Allahabad High Court, in overruling the contention that it was a juristic person, extracted the following statement of law contained in Bhagwanji Morarji v. Alembic Chemical Works Ltd. A.I.R. 1948 P.C. 100.:

Before the Board it was argued that, under the Indian Partnership Act, 1932, a firm is recognised as an entity apart from the persons constituting it and that the entity continues so long as the firm exists and continues to carry on its business. It is true that the Indian Partnership Act goes further than the English Partnership Act, 1890, in recognising that a firm may possess a personality distinct from the persons constituting it; the law in India in that respect being more in accordance with the law of Scotland than with that of England. But the fact that a firm possesses a distinct personality does not involve that the personality continues unchanged so long as the business of the firm continues. The Indian Act, like the English Act, avoids making a firm a corporate body enjoying the right of perpetual succession. The agreement of 7th December, 1907, was made between the company and four named individuals and when all of those four individuals had ceased to be members of the firm, there was no privity between the company and the firm as it then existed.

29. It may be mentioned that the law is different in this regard in Scotland. In that country, 'a firm is a legal person distinct from the partners of whom it is composed.' But in English Jurisprudence,' the firm is only a compendious name for certain persons who carry on business or have authorised one or more of their number to carry it on, in such a way that they are jointly entitled to the profits and jointly liable for the debts and losses of the undertaking.' For the purpose of determining legal rights, 'there is no such thing as a firm known to the law 'and this is so likewise in India though the practical significance of the collective term receives a new emphasis in the Partnership Act.

30. Sri Ranganathachari next cited to us the judgment of Subba Rao, J., (as he then was) in The Public Prosecutor v. Jacob Nadar [1951] 2 S.T.C. 53. It was held by the learned Chief Justice that for purpose of Section 15 of the Madras General Sales Tax Act, a firm was a 'person' because for the purpose of assessment it is treated as one entity. This was followed by Somasundaram, J., of the Madras High Court in Behara Lachanna Patnaik, In re [1952] 3 S.T.C. 222. We do not think that these two decisions render us any assistance in ascertaining the scope of the instant G.O. The learned Judges there were concerned with Section 15 of the Act and the word 'person' was construed as including a firm. It was not laid down as a rule of universal application that 'person' wherever it occurs in that Act or in the rules or orders made under the Act would take in a 'firm'. It cannot be overlooked that each word derives its colour from the context and the same meaning cannot be given to it in every section. In our considered opinion, the words ''person' and 'dealer' have been used by the Government in the several G.Os. in two different senses and in the concerned G.O. the word only connotes an individual as distinct from a firm or an association or collection of individuals falling within the ambit of the definition of 'person' occurring in the Madras General Clauses Act (1 of 1891).

31. The purpose for which the General Clauses Act was enacted was stated by Sinha, J., (as he then was) in N. Subrahmania Iyer v. Official Receiver A.I.R. 1958 S.C. 1 at 10 in the following words :

It may be added that a General Clauses Act is enacted in order to shorten language used in parliamentary legislation and to avoid repetition of the same words in the course of the same piece of legislation. Such an Act is not meant to give a hide-bound meaning to terms and phrases generally occurring in legislation. That is the reason why the definition section contains words like 'unless there is anything repugnant in the subject or context.'

32. We do not think that there is any warrant for incorporating the definition of 'person' given in the Madras General Clauses Act (1 of 1891) into the Madras General Sales Tax Act, 1939. It looks to us that having regard to the considerations pointed out above, there is certainly repugnancy between the word 'person' as defined in the Madras General Clauses Act and the context of the concerned G.O. It is apparent from a reading of the different G. Os. that the word 'person' has been employed in its popular sense and not as a legal or juristic entity.

33. For these reasons, we hold that the view of the Sales Tax Appellate Tribunal is unsustainable and allow the revision. We make no order as to costs.


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