LexK. R. C. S. BALAKRISHNA CHETTY & SONS & CO. versus THE STATE OF MADRAS
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736 SUPREME COURT REPORTS [1961] '96° supply of jockeys of efficiency and skill failed the Th C -. . business of the respondent would no longer be possi- e ommissioner b . of Income-tax le. Thus the money was spent for the preservation West Bengal' of the respondent's business. v. As to the third point there is no substance in the Royal Calcutta submission that the expenditure was in the nature of Turf Club a capital expense because no asset of enduring nature Kapur J. was being created by this expense. In our opinion the High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respon- dent's business. It was to prevent the threatened extinction of the business of the respondent. In the result this appeal is dismissed with costs. November ag. Appeal dismissed. K. R. C. S. BALAKRISHNA CHETTY & SONS & CO. v. THE STATE OF MADRAS (J. L. KAPUR, M. HIDAYATULLAH and J.C. SHAH, JJ.) Sales Tax - Claim of exemption. by licensee-If conditional upon observance of conditions and restrictions-Ma4J'as General Sales Tax Act, I939 (Mad. IX of z939), s. 5. The appellants, who were dealers in Cotton yarn, obtained a license under the Madras General Sales Tax Act, 1939 (IX of 1939). Section 5 of that Act exempted such dealers from pay- ment of sales tax under s. 3 of the Act subject to such restric- tions and conditions as might be prescribed, including the condi- tions as to licenses and license fees. Section 13 required a licen- see to keep and maintain true and correct accounts of the value of the goods sold and paid by him. Rule 5 of the General Sales Tax Rules provided that any person seeking exemption under s. 5 of the Act must apply for license in Form 1 which made the license subject to the provisions of the Act and the rules made thereunder. The appellants on surprise inspection were found to maintain two separate sets of accounts, on the basis of one of which they submitted their returns and the other 2 S.C.R. SUPREME COURT REPORTS 737 showed black-market activities. The question for determination in the -appeal was whether the appellants who had been refused exemption an·d were assessed to tax, could claim exemption under the Act. Held, that the question must be answered in the negative. Section 5 of the Madras General Sales Tax Act, 1939, pro- perJ.y construed, leaves no manner of doubt that an exemption from assessment thereunder is clearly conditional upon the observance by the assessee of the conditions and restrictions imposed by the Act, either in the rules or in the license itself, and the words 'subject to' used by the section means "conditio- nal upon". It was not correct to say that licensee was exempt from assessment so long as he held the license notwithstanding any breach of the provision of the law and that the only penalty he could be subjected to was the cancellation of his license or cri- minal prosecution. CIVIL.APPELLATE JURISDICTION: Civil Appeals Nos. 490 and 491 of 1958. Appeals from the judgment and decree dated Febru- ary 18, 1955, of the Madras High Court in Second Appeals Nos. 2038 and 2039 of 1950. N. R. Raghavachariar, M. R. Krishnaswami and T. V. R. Tatachari, for the appellant. R. Garw,pathi Iyer and D. Gupta, for the respondent. 1960. November 29. The Judgment of the Court was delivered by K. R. C. S. Balakrishna Chctty & Sons & Co. v. J'lie State of Madras KAPUR, J.-Two suits were brought by the appel- Kapur J. lants for a declaration against the levy of sales tax by the State of Madras and an injunction was also prayed for. Both the suits were decreed by the Subordinate Judge of Salem and the decrees were confirmed on appeal by the District Judge of Salem. Two appeals were taken to the High Court by the State of Madras against those decrees and by a judgment dated Febru- ary 18, 1955, the decrees were set aside by a common judgment. Against these decrees the appellants have brought these appeals by a -certificate of that Court. The appellants are merchants dealing in cotton yarn. They obtained a license under s. 5 of the Madras Genera.I Sales Tax Act (Act IX of 1939), here- inafter referred to as the 'Act'. This license exempted _, ... · I960 K. R.C.S. Balakriskna Chelty & Sons & Co. v. The State of 1.J adras Kapur ]. 738 SUPREME COURT REPORTS [1961] them from assessment to sales tax under s. 3 of the Act on the sale
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