Varadaraja Iyengar, J.
1. This is a petition under Article 226 of the Constitution. The petitioner is the Indo-Mercantile Bank Ltd. having its registered office at Mattanchery, Cochin, and carrying on banking business at various places including Quilon. The question sought to be raised is about the validity of the assessment to profession tax under the District Municipalities Act of 1116 (Travancore), by the Quilon Municipality, over the income of the Quilon branch of the Bank for the two half years comprised in the year 1953-54. The Commissioner of the Quilon Municipality who is impleaded as the 1st respondent to the petition did not accept the income as returned, but proceeded to assess it at Rs, 25,665 for each of the half years, after disallowing the deduction claimed, of interest on amounts borrowed from the Head Office for purpose of the working capital of the branch, and, imposed a tax of Rs. 644/-. The appeal filed by the petitioner before the 2nd respondent, Quilon Municipal Council, had also been, rejected.
The petitioner claims that in computing the income of the branch for purpose of assessment to the tax, the interest payable on amounts borrowed as here, must necessarily be deducted, and the assessments made without such deduction are illegal and ultra vires. The prayer is made therefore for the issue of a writ of certiorari or other appropriate writs, order or direction to quash the assessment orders in question. The petition is resisted by the respondents on the footing that the petitioner did not specifically put forward a case that the branch at Quilon had borrowed any particular amount from the Head Office and that interest at an agreed rate was being paid to Head Office. In any event, the reason given by the Municipal Council for disallowing the Interest viz. that there could be no debtor-creditor relationship between the branch and the Head Office was perfectly legal and sustainable and there was accordingly no merit in the present motion.
2. Learned counsel for the petitioner says that the borrowing herein was really from other branches, of moneys in deposit with them, and that the interest charges incurred in respect of such deposits were properly admissible. The description had been given, no doubt, of these interest charges as 'Head Office interest' apparently because the remittance had been made by the branches at the direction of the Head Office, but this may not be allowed to affect the question.
Learned counsel for the respondent, Municipal Council, objects to the introduction, in the arguments, of an aspect of borrowing from branches apart from Head Office, so long as it had not been hinted in the affidavit in support of the writ motion or by supplemental affidavit with permission of court, and says that even so the distinction is without difference. I agree.
For, as laid down in The Chief Revenue Authority. Travancore v. The Imperial Bank of India, Alleppey,. 16 Tray LJ 611 (A), with reference to the Imperial Bank and its branches, the law knows of only one composite body viz., the Indo-Mercantile Bank herein 'though it transacts business in different parts of the country through different branches or agencies.' In this view the petitioner Bank vis-a-vis its branch at Quilon or the branch of Quilon vis-a-vis all other branches elsewhere, cannot be treated as distinct and different legal entities for the purpose of tax provisions and the relationship of creditor and debtor is not legally possible between them; In the words of the learned Judges who dicided, 16 Trav LJ 611 (A).
'The true test is whether the creditor can enforce remedies against his debtor in a Court of law. If he cannot, there is no relationship of debtor and creditor which the law can recognise. A mere entry in the account books of the Head Office that the branch is a debtor to the former cannot constitute the legal relationship of debtor and creditor between the two offices.'
To similar effect is the decision in The Chief Revenue Authority, Travancore v. The Nedungadi Bank Ltd., Alleppey. 3 Trav LT 330 (B). Learned counsel for the petitioner relied on South India Bank Ltd. v. Income-tax Commissioner, 1953 Ker LT 539: (AIR 1953 Trav-Co 316) (C). That was a reference made under Section 50(2) of the Travancore Income-tax Act, VIII of 1096, and one of the questions referred was whether the amount transferred in any year from the Head Office of the South Indian Bank Ltd., Tinneivelly to its branches in Travancore can be treated as transferred partly from its own capital and partly from its borrowed capital in the ratio which the Bank's own capital bears to its borrowed capital for the year.
The Bank was then being assessed as a nonresident under Section 32 of the Act in the name of the agent and on income which arose out of the business connection that the Bank had in Travancore. The Court found that the business connection consisted in sending moneys for investment in Travancore and doing business there with such moneys as also with amounts received at the branches from depositors. Money transferred from the Head Office was out. of the funds available there and the bulk of such funds had been borrowed.
It was therefore not possible to ear-mark the amounts transferred as having been made from out of the one or the other of. the two kinds of capital available at the Head Office and the only reasonable way was to record the transfer as having been made from both sources proportionately. But the point of importance for us is that in answering so the court still held that the branches in Travancore had no separate existence apart from the Head Office at Tinnelvelly and therefore were but one entity, and there could be no transactions of loan by the branches with the Head Office.
3. The petition therefore fails and is dismissed with costs including counsel's fee Rs. 100/-.