Case: Chowringhee Sales Bureau Ltd Vs. Commissioner of Income Tax, West Bengal

observed :"Entry 48 authorises the imposition of tax either on a seller or a purchaser or both. If, however, the Legislature purports to levy a tax upon a person who is neither a seller nor a purchaser, the legislation must be declared ultra vires, because it treats an operation as a sale of goods which, according to the Sale of Goods Act, does not amount to such a sale."10.We find ourselves unable to agree with the above observations. An auction sale in view of the provisions of Section 4 read with Section 64 of the Sale of Goods Act would have to be considered to be a sale for the purpose of the Sale of Goods Act. There is nothing in Entry 48 which restricts the power of the Legislature in the matter of the imposition of the sales tax to the levy of such tax on the owner of the goods on whose behalf they are sold or the purchaser only. Where transaction is one of sale of goods as known to law, the power of the legislature to impose a tax thereon, in our view, is plenary and unrestricted subject only to any limitation which might have been imposed by the Government of India Act or the Constitution (see J. K. Jute Mills Co. Ltd. v. The State of Uttar Pradesh, (1961) 12 STC 429 = (AIR 1961 SC 1534 )).In view of the wide amplitude of the power of the State or Provincial Legislature to impose tax on transactions of sale of goods, it would, in our opinion, be impermissible to read a restriction in Entry 48 on the power of the State Legislature as would prevent the said legislature from imposing tax on an auctioneer who carries on the business of selling goods and who has in the customary course of business, authority to sell goods belonging to the principal. What is sought to be taxed is the transaction of the sale of goods. If there is a close and direct connection between the transaction of sale and the person made liable for the payment of sales tax, the statutory provision providing for such levy of sales tax would not offend entry 48.It cannot be disputed that there is a close and direct connection between an auctioneer and the transaction of auction sale. As such, the definition of the word "dealer" in Explanation 2 of Section 2 (c) of the Bengal Act cannot be deemed to be ultra vires the power of the Provincial or State Legislature on the ground that the legislature purports to levy tax on a person who is neither a seller nor a purchaser. It was, in our opinion, within the competence of the Provincial Legislature to include within the definition of the word "dealer" an auctioneer who carries on the business of selling goods and who has in the customary course of business authority to sell goods belonging to the principal.11. We may also observe that a Division Bench of the Madras High Court in the case of Zackria Sons Private Limited v. State of Madras, (1965) 16 STC 136 (Mad) had dissented from the view taken by the Calcutta High Court in the appellants case against the State of West Bengal.12. It is apparent from the order of the Appellate Assistant Commissioner and has not been disputed before us in the present case that in the cash memos issued by the appellant to the purchasers in the auction sales it was the appellant who was shown as the seller. The amount realised by the appellant from the purchasers included sales tax. The appellant, however, did not pay the amount of sales tax to the actual owner of the goods auctioned because the statutory liability for the payment of that sales tax was that of the appellant. The appellant company did not also deposit the amount realised by it as sales tax in the State exchequer because it took the position that the statutory provision creating that liability upon it was not valid. As the amount of sales tax was received by the appellant in its character as an auctioneer, the amount, in our view, should be held to form part of its trading or business receipt. The appellant would, of course, be entitled to claim deduction of the amount as and when it pays it to the State Government.13. The fact that the appellant credited the amount received as sales tax under the head "sales tax collection account" would not, in our opinion, make any material difference. It is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. We may in this context refer to the case of Punjab Distilling Industries Ltd. v. Commissioner of Income tax, Simla, (1959) 35 ITR 519 = (AIR 1959 SC 346 ). In that case certain amounts received by the assessee were described as security deposits. This Court found that those amounts were an integral part of the commercial transaction of the sale of liquor and were the assessees trading receipt. In dealing with the contention that those amounts were entered in a separate Ledger termed "empty bottles return security deposit account", this Court observed :"So the amount which was called security deposit was actually a part of the consideration for the sale and therefore part of the price of what was sold. Nor does it make any difference that the price of the bottles was entered in the general trading account while the so-called deposit was entered in a separate Ledger termed "empty bottles return deposit account" for, what was a consideration for the sale cannot cease to be so by being written up in the books in a particular manner."14. W

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]12. It is apparent from the order of the Appellate Assistant Commissioner and has not been disputed before us in the present case that in the cash memos issued by the appellant to the purchasers in the auction sales it was the appellant who was shown as the seller. The amount realised by the appellant from the purchasers included sales tax. The appellant, however, did not pay the amount of sales tax to the actual owner of the goods auctioned because the statutory liability for the payment of that sales tax was that of the appellant. The appellant company did not also deposit the amount realised by it as sales tax in the State exchequer because it took the position that the statutory provision creating that liability upon it was not valid. As the amount of sales tax was received by the appellant in its character as an auctioneer, the amount, in our view, should be held to form part of its trading or business receipt. The appellant would, of course, be entitled to claim deduction of the amount as and when it pays it to the State Government.13. The fact that the appellant credited the amount received as sales tax under the head "sales tax collection account" would not, in our opinion, make any material difference. It is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. We may in this context refer to the case of Punjab Distilling Industries Ltd. v. Commissioner of Income tax, Simla, (1959) 35 ITR 519   = (AIR 1959 SC 346  ). In that case certain amounts received by the assessee were described as security deposits. This Court found that those amounts were an integral part of the commercial transaction of the sale of liquor and were the assessees trading receipt. In dealing with the contention that those amounts were entered in a separate Ledger termed "empty bottles return security deposit account", this Court observedthe amount which was called security deposit was actually a part of the consideration for the sale and therefore part of the price of what was sold. Nor does it make any difference that the price of the bottles was entered in the general trading account while the so-called deposit was entered in a separate Ledger termed "empty bottles return deposit account" for, what was a consideration for the sale cannot cease to be so by being written up in the books in a particular manner.We, therefore, agree with the High Court in so far as it has answered the question referred to it in the negative and against the appellant.