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P.V. Palaniappa Pillai Vs. Deputy Commercial Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 713 to 718 of 1967
Judge
Reported in[1971]28STC502(Mad)
AppellantP.V. Palaniappa Pillai
RespondentDeputy Commercial Tax Officer
Appellant AdvocateK. Srinivasan and ;K.C. Rajappa, Advs.
Respondent AdvocateK. Venkataswami, First Assistant Government Pleader
DispositionPetition dismissed
Cases ReferredSultan Ahmed Rowther v. State of Madras
Excerpt:
- - incidentally, it may be noted that the respondent imposed penalties under section 12(3) of the act for the first four years, as, according to him, the petitioner deliberately avoided registration and failed to disclose the assessable turnover in relation to the transactions admittedly carried on by the petitioner......in cases where the aggregate is referable to proceeds of the sale by a person of agricultural produce grown within the state by himself, then it would not be assessable turnover. again, if such produce is grown within the state on any land in which he has an interest either as owner, usufructuary mortgagee, tenant or otherwise, then also the proceeds of the sale of such agricultural produce would not come within the net of taxation. in the instant case, we are not concerned with the later limb of the proviso, because it is not in dispute that the petitioner has no interest in the land, either as owner or as tenant or otherwise as provided for in section 2(r) of the act. but what is sought to be urged with great effort is that the petitioner is growing agricultural produce by.....
Judgment:
ORDER

1. These writ petitions relate to assessment orders passed by the respondent for the years 1960-61 to 1965-66. In so far as the years 1960-61 to 1963-64 are concerned, the assessments are under Section 12 of the Tamil Nadu General Sales Tax Act. The two other assessments are provisional assessments. The petitioner is an agriculturist residing at Uralipatty in Melur Taluk, Madurai District. Besides his occupation as an agriculturist, the petitioner engages himself in an avocation such as obtaining on lease the cocoanut topes situate in and around his village belonging to third parties, gathers the cocoanuts from such topes and disposes of the same in open market. The petitioner himself says that he pays the lease amounts agreed between himself as lessee and the owner of the tope as lessor, out of the sale proceeds of cocoanuts gathered by him as the lessee of the garden. He did not register himself as a dealer under the Tamil Nadu General Sales Tax Act, 1959. The assessing authority, on information that the petitioner was dealing in cocoanuts, inspected his place of business and recovered several lease deeds. The lease deeds disclosed that the petitioner bargained with the owner of the land or the tope to have the right to pluck the usufructs from the trees grown on such lands, and in consideration of such a right vested in him to remove the usufructs or the produce from the trees, he was to pay the agreed amount to the owners. It is not in dispute that the petitioner was enquired into before the assessment proceedings were duly initiated, and even in the statement given by him to the appropriate authority, he never claimed any interest in the land nor did he project a case that he was interested in growing the produce himself in the State. As a matter of fact, he would not even suggest in the statement, which is seen from the records produced on the issue of rule nisi, that he expended moneys for growing the produce in the demised lands and that this was also taken into consideration when the leases were agreed to between himself and the lessors. In those circumstances, both the final orders of assessment and the provisional orders of assessment were passed by the assessing authority. In fact, for the years 1960-61 to 1963-64, the assessments were completed in June, 1964. For the later two years, for the year 1964-65, the order of assessment is dated 20th July, 1965, and for the year 1965-66, it was made on 30th September, 1966. The petitioner has come up to this Court for the issue of a writ of certiorari.

2. The petitioner has raised two contentions. The first one, viz., that the cocoanuts are oil-seeds, is no longer available to him in view of the decision in Kannappa Mudaliar v. State of Madras [1968] 21 S.T.C. 41. The other contention now raised by Mr. Srinivasan, the learned Counsel for the petitioner, is that even if he is a lessee of the garden or topes, he having grown either physically or notionally the agricultural produce, viz., cocoanuts, within the State of Tamil Nadu, the turnover in relation to such sales of cocoanuts cannot be characterised as assessable turnover as it is excluded under Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959. He has, however, fairly conceded that the petitioner has no interest in the land, but the sum total of his activity and his transactions or dealings with the owners of the topes has to be understood fairly as enabling him to grow the agricultural produce within the meaning of Section 2(r) of the Act. The learned Government Pleader appearing for the State would, however, state that it was not the case of the petitioner at any time that he accepted, himself, to grow the agricultural produce in question and what all is reflected in the contract of lease between himself and the owner of the tope is an entitlement of the petitioner to the usufruct grown on the land belonging to such owners. He relies upon a decision of this Court in Sultan Ahmed Rowther v. State of Madras [1954] 5 S.T.C. 166 and contends that the order of assessment is proper. Incidentally, it may be noted that the respondent imposed penalties under Section 12(3) of the Act for the first four years, as, according to him, the petitioner deliberately avoided registration and failed to disclose the assessable turnover in relation to the transactions admittedly carried on by the petitioner.

3. Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959, defines 'turnover' thus:

'turnover' means the aggregate amount for which goods are bought or sold, or supplied or distributed by a dealer, either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sales by a person of agricultural or horticultural produce, other than tea grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover;

Explanation (1).--'Agricultural or horticultural produce' shall not include such produce as has been subjected to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading, sorting or drying;

Explanation (2).--Subject to such conditions and restrictions, if any, as may be prescribed in this behalf--

(ii) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or before the delivery thereof;

(iii) 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

(iv) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said customer, the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former.

4. The assessable turnover therefore would take into its fold the aggregate amount for which goods are bought or sold, etc. The tax element is attracted, provided there is a sale of the produce, supply or distribution for consideration. There is however a proviso which exempts such aggregate amounts from being characterised as assessable turnover. In cases where the aggregate is referable to proceeds of the sale by a person of agricultural produce grown within the State by himself, then it would not be assessable turnover. Again, if such produce is grown within the State on any land in which he has an interest either as owner, usufructuary mortgagee, tenant or otherwise, then also the proceeds of the sale of such agricultural produce would not come within the net of taxation. In the instant case, we are not concerned with the later limb of the proviso, because it is not in dispute that the petitioner has no interest in the land, either as owner or as tenant or otherwise as provided for in Section 2(r) of the Act. But what is sought to be urged with great effort is that the petitioner is growing agricultural produce by himself, and no doubt within the State, that the result of such an activity is the cocoanut produce, that it is by the sale of such cocoanuts the aggregate amount of such an activity is arrived at, and that, therefore, such proceeds of the sale by the petitioner of the cocoanuts grown by himself obviously have to be excluded from the assessable turnover of the petitioner. This argument overlooks the fact that the petitioner is not growing the produce nor is the growth of the agricultural produce, by himself. He is merely a lessee of a tope. By way of analogy we can safely adopt the definition of 'tope' given in the Tamil Nadu Agricultural Income-tax Act (5 of 1955). There, Section 2(y) says : ' 'tope' means any land containing large groups of fruit trees or valuable timber trees, whether growing spontaneously or grown artificially and includes orchards.' Thus, the growing of the fruit bearing trees is an essential prerequisite to enable a person to claim the benefit of the first limb of the proviso in Section 2(r). The petitioner had the earliest opportunity to explain his case. In the statement given by him, he did not say that he did grow agricultural produce in the lands or in the topes leased to him, by exertion of his own 'muscles and sinews'. He would not even mention that he expended moneys for the growth of such produce. In the absence of any evidence or any inkling in the record that the petitioner should be deemed to be responsible for the growth of the agricultural produce in the tope, I am unable to comprehend the contention that the turnover in question has to be excluded on that ground.

5. The other important aspect, which is also the sine qua non for exclusion is that the growth of the produce should be by himself. The produce must be the result of personal exertion and physical application. There is nothing on record to indicate that the petitioner ever exerted himself physically and personally for the growth of the cocoanuts in the topes. Apparently, the contract disclosed that the petitioner, without gaining or contracting for any interest in the land, was only anxious to secure a right to pluck the cocoanuts from the topes or the lands belonging to third parties, and in consideration thereof pay a lump sum year after year or at stated intervals. Thus, this is a case in which two primordial requirements of the first limb of the proviso, viz., that the produce should be grown within the State and that growth should be by the assessee himself, are conspicuously absent.

6. As pointed out by the learned Government Pleader, this case comes squarely within the principles laid down in Sultan Ahmed Rowther v. State of Madras [1954] 5 S.T.C. 166. That is a case in which the contract admittedly did not disclose any interest in the petitioner over the land. He secured under the lease a right to the usufructs from the trees in the tope. In those circumstances, this Court held:

All that the assessee got under the contract was only an exclusive right to the usufruct and that could by no stretch of language be deemed to be an 'interest in land'.

7. I respectfully adopt the ratio. I may also add that the second limb of the proviso contemplates that the person claiming an exclusion of the aggregate amount from being included in the assessable turnover should establish that he has an interest in the land over which agricultural produce is grown, and that interest should be demonstrated and be demonstrable. It is not every kind of interest that might create a situation as is contemplated in the later limb of the proviso. It is only a substantial interest and not a formal one in the land that would enable a person to claim the benefit thereunder. The reason is not so difficult to state. If he has an interest in such land, then if agricultural produce is produced thereon, it would be reasonable to attribute such an activity to the person having an interest therein, and such nexus being established, the proceeds of the sale of such produce will automatically be excluded from the assessable turnover because they would relate to sale of agricultural produce.

8. As I am unable to agree with the learned Counsel for the petitioner on the question that the turnover in question is excludable under Section 2(r) of the Act, the orders of assessment in all the years in question are proper and there are no errors apparent or otherwise in them. The penalty imposed is only consequential. There is no error of jurisdiction either in the order impugned. The writ petitions are therefore dismissed. There will be no order as to costs.


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