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W.P.A. Soundarapandian and Brothers Vs. the Deputy Commercial Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 1257 of 1960
Judge
Reported in[1962]13STC870(Mad)
AppellantW.P.A. Soundarapandian and Brothers
RespondentThe Deputy Commercial Tax Officer and anr.
Appellant Advocate M.K. Nambiyar and ; M.A. Subramaniam, Advs.
Respondent Advocate The Additional Government Pleader
DispositionPetition allowed
Cases ReferredMadras v. Deputy Commercial Tax Officer
Excerpt:
- .....has been used in the act in a commercial sense, that is to say, an enterprise undertaken with a view to make profit. on that view, they held that the transactions were not taxable. this view was followed in sree meenakshi mills ltd. v. state of madras (1955) 1 m.l.j. 104.4. since these judgments were rendered, the madras general sales tax act, 1959, has enacted a new definition of 'business' which reads :'business' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern.5. it is apparent from this definition, which is an inclusive one, that it does not dispense with the requirement, in order to constitute an activity a business.....
Judgment:
ORDER

Veeraswami, J.

1. This is a petition for a writ of prohibition directing the respondents from taking further proceedings against the petitioner's firm in pursuance of a notice dated 22nd August, 1960, asking the petitioner to produce accounts.

2. The petitioner is a firm of planters, and owns cardamom estates in Lower Palnys, Madurai District. The estates are said to be situated .in the interior and as it is difficult for the labourers to get their own provisions and grocery, the petitioner used to buy them and supply the same to the labourers as a matter of convenience and amenity to them without any motive of profit, and adjust the sale price against the wages to be paid to the labourers. In such circumstances, according to the petitioner, the transactions of supply of food-grains and grocery to the labourers are not in the course of any business, and do not amount to sales within the meaning of the Madras General Sales Tax Act, 1959. For the same reason, the petitioner states that he is not a dealer in respect of those transactions. The petitioner was assessed for 1957-58 to sales tax on such transactions. Against the order of assessment, the petitioner filed an appeal, and the Commercial Tax Officer accepted the petitioner's contention that there was no business done in those commodities with an intention to profit, and the transactions were, therefore, not taxable. Against the impugned notice, the petitioner sought the aid of the Board of Revenue which, however, by its order dated 5th October, 1960, stated that the supply of goods to the employees involved transfer of property though it might be without accrual of any profit, and that such transactions would fall under the definition of 'business' in Section 2(d) and 'sale' in Section 2(n) of the Madras General Sales Tax Act, 1959. The Board intimated its view that the transactions of the petitioner were, therefore, liable to tax under the provisions of the Act, and that if he was aggrieved by an assessment, he might seek the remedy provided under the Act.

3. There appears to be no dispute in relation to the facts. The petitioner purchases food-grains and grocery, and supplies the same to his employees in the cardamom estates situated in outlying places in the interior as an amenity and entirely with a view to help them. The motive for the transactions does not certainly appear to be commercial in the sense of making or intending to make a profit out of the transactions. In similar circumstances, it has been held by this Court in Gannon Dunkerley v. State of Madras I.L.R. 1955 Mad. 832, that the transactions are not in the course of business, and therefore, the sales are not chargeable to sales tax. In that case, the assessee supplied food-grains for the benefit of its workmen and recovered their cost by debiting the value against their wages. There was an elaborate consideration of the word 'business' and the learned Judges held that the word has been used in the Act in a commercial sense, that is to say, an enterprise undertaken with a view to make profit. On that view, they held that the transactions were not taxable. This view was followed in Sree Meenakshi Mills Ltd. v. State of Madras (1955) 1 M.L.J. 104.

4. Since these judgments were rendered, the Madras General Sales Tax Act, 1959, has enacted a new definition of 'business' which reads :

'Business' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern.

5. It is apparent from this definition, which is an inclusive one, that it does not dispense with the requirement, in order to constitute an activity a business for purposes of the Act, that it should be carried on with a motive to make profit. The effect of this new definition is only that actual accrual of profit is not required to constitute an activity a business. It follows, therefore, that the definition of business in the Madras General Sales Tax Act, 1959, has brought about no change to the exposition of the legal position in the cases above referred to. That was the view I took in Chairman, Committee of Management, Integral Coach Factory Canteen, Madras v. Deputy Commercial Tax Officer, Perambur Division [1962] 13 S.T.C. 827. Following this view, this petition has to be allowed.

6. The learned Additional Government Pleader contended that the facts, in this case, have not been settled, and before arriving at that stage, a writ of prohibition should not issue. About the proposition, there is no difficulty ; but, in this case, there appears to be no real controversy about the facts. They have been found in the order dated 17th December, 1958, of the Commercial Tax Officer on appeal in relation to the year 1957-58. The petitioner states in his affidavit, that the same practice as was noticed by the Commercial Tax Officer is followed for the subsequent years too in the matter of supply to the employees, of the particular commodities without any intention to profit, and there is no reason to doubt this statement.

7. The petition is allowed, and the rule nisi is made absolute. There will, however, be no order as to costs.


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