MIS. CHOWRINGHEE SALES BUREAU (P) LTD. versus C.I.T. WEST BENGAL

Citation: [1973] 2 S.C.R. 618 · Decided: 10-10-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

·618 
MIS. CHOWRINGHEE SALES BUREAU (P) LTD. 
A 
v. 
C.I.T., WEST BENGAL 
October 10, 1972 
[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANN.\, JJ.] 
Bengal Finance (Saks Tax) .Act, 1941-Whether ".Auctioneer" covered 
by expressio11 "Dealer'' i11 explanation 2 of Ste. 2(c)-Definitlon of the 
word "Dtaltr" whether ultra vires the power of the State /egislc.ture under 
Entry 48, List II, Schedule Vil of Govt. <Jf India Act, 1935-Asuss!C 
compr.n.v act;ng as autioneer-Amount realised aS shies tax in auction sales 
and credittd separately under Sales Tax Collection .Account, whether part 
of appellant's income. 
The appellant asse>sce is a priva~• limited. Company dealing in furni-
ture and also acts as an auctioneer. 
1:11 respect of the sales effected by the 
appellant as auctionce.r, it reali9•d, during the year in question, in addition 
to the dommission, Rs. 32,986/. as 'ales tax. 
This amount was credited 
separately in the books under the Sales Tax Collection Account. 
This 
sum was neither paid over l-0 the ex-chequer nor was it refu:llded to the 
persons from it had been collected. For the year in question, the I.T.O. 
held that the sum of Rs. 32,9861- was a part of the appellant's income 
of the >0mc nature as the commis.ion received by it on the auction sales. 
The appellant relying on the decision of the Calcutta High 0-•JJ't, [1961) 
12 S.T.C. 535 contended that as the State Gover.mnent had L~ legislative 
~ompctence to include 
11auctioncrJr
11 in the definition of "dealer" 'in the 
Bengal Finance (Sales Tax) Act, 1941, the amount in question was not a 
trnde receipt liable to tax under Income Tax Act. 
The Appellate Asstt. Commissicmer and th•• Appellate Tribunal held 
in favour of the appellant. 
However, a reference under Sec. 66( I) of 
the Indian Income Tax Act, Was answered by the High Court against the 
appellant. Two questions were posed befol'e this Court : (I) Whether the 
decision of the Calcutta High Court in [1961] 12 S.T.C. 535 was correct 
and (2) whether the answer to the reference by the High Court was right? 
HELD : An auction sale i:TI view of the provisions of Sec. 4 read with 
64 of the Sale of Goods Ac:t would ha"o to be considered to be a sale for 
the purpose of.Sale of Goocfa Act. 
There is nothing in Entry 48 of List 
TI of Schedule VII of the Government' of India Act (corresponding to 
Entry 54 of List JI of the Seventh Schedule of the Constitution) which 
restricts tlr. power of the Legi'lature in the matter of the imposition of the 
Sales Tax to the levy of. such tax ott> the owner of the ~oods on who5" 
behalf they are sold or the purchaser where the transaction is one of •ale of 
goods. In view of the wide amplitude of the power of the State or provin-
cial legislature to Jmpose tax on transactions of sale of goods, it would be 
· impermi,.ible to read a restriction in entry 48 on the power of the State 
legislature as would prevent the State legislature from imposing tax on an 
auctioneer who carrie> on the busi:r.ess of selling of goods and who has in 
customary course of business authority to sell goods belonging to 
the 
people. What i< sought to be taxed is the transaction of th> sale of goods. 
If there is a close and direct connection between the transaction of sale 
and the person rmde liable for the payment of tax as in the prese:nt case. 
_the statutory provision providing for such levy on sales tax would 
not 
B 
c 
D 
E 
F 
G 
H 
.. 
A 
B 
CHOWRJNGHEE SALES v. C,J.T. (Khanna, !.) 
619 
offend entry 48. 
As such, the definition of the word "Dealer" in expla-
nalion 2 of S. 2(c) of the Bengal Act cannot be deemed to hc ultra vires, 
It was within the competence of the provincial legislature to include within 
the definition of the word "dealer" an auctioneer who carries on too busi-
ness of selling of goods and who bas in the customary course of business 
authority to sell goods belonging to the principal. [622HJ 
J. K. Jute Mills Co. Ltd. v. State of Uttar Pradesh, (1961] 12 S.T.C. 
535~ overrul1~d. -
S'tlle of Madras v. Connon Dunkerley & Co. (Madras) Ltd. (1958] 9 
S.T.C. 353, K. L. Johar & Co. v. Dy. Commercial Ta.t Officer, [1965] 16 
S.T.C. 213, J. K. !Ille Mills Co. Lt.I. v. Tlie Stare of Uttar 
Pradesh, 
11961] 12 S.T.C. 429, followed. 
Zakria Sons P. Ltd. v. State of Madras. [1965] 16 S.T.C. 136, referred 
C 
to. 
D 
As the amount of sales tax was received by the appellant in its 
character as an auctioneer, the amount should be held lo form part of its 
tr

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