Decided on October 06,1953



Rajamannar, C.J. - (1.) This is a reference under Rule 17 of Schedule IV of the Madras City Municipal Act. The question referred is whether a company called the Indian Leaf Tobacco Development Co., Ltd., is liable to pay company tax to the Corporation of Madras for the six half years commencing from the first half year of 1943-47. The Corporation claimed tax at the rate of Rs. 1000 for each half year on the ground that the paid up capital of the company exceeded Rs. 20,000,00, The company appears to have taken up the extreme position that they were not liable to pay any tax at all evidently on the ground that they were not transacting any business within the city. The learned Chief Judge of the Court of Small Causes held that the company must be deemed to have been transacting business in the City during the concerned half years but he held that the company was not liable to pay company tax.
(2.) To understand the scope of the reference it is necessary to refer to certain provisions of the City Municipal Act. Section 110 of that Act provides for the levy of a tax on companies transacting business within the city in any half year for not less than 60 days in the aggregate. Under Section 113(1), the expression "transacts business" in Section 110 should be deemed to include the doing of acts of business of whatever nature, whether isolated or not, such as soliciting, obtaining or transmitting orders, or buying, making, manufacturing, exporting, importing, receiving, transmitting or otherwise dealing with goods. Schedule IV to the Act contains rules relating to taxation. Rule 7 relates to assessment of companies. It runs as follows : "7. Companies shall be assessed by the Commissioner on the following scale- Lakhs of rupees Rs. A. Less than one 30 B. One and more than one, but less than two 50 C. Two and more than two,but less than three 100 Indian Leaf Tobacco Development Co. Ltd. vs. Council, Corporation of Madras (06.10.19... Page 3 of 5 pment Co. Ltd. vs. Council, Corporation of Madras (06.10.19... Page 3 of 5 D. Three and more than three, but loss than five 150 E. Five and more than five, but less than 250 F. Ten and more than ten, but leas than twenty 500 G. Twenty and more than twenty 1000 Provided that any company, the head or principal office of which is not in the City arid which shows that the gross income received in, and/or from the city in the year immediately preceding the year of taxation- (a) has not exceeded Rs. 5000, shall pay only Rs. 25 per half year; (b) has exceeded Rs. 5000, but shall pay only Rs. 50 per half year not exceeding Rs. 10,000; (c) has exceeded Rs. 10,000 but has not exceeded Rs. 24,000, shall pay only Rs. 100 per half year; and (d) has exceeded Rs. 20000 shall pay per half year Rs. 100 together with a sum calculated at the rate of Rs. 25 per half year for every Rs. 5000 or part thereof, of gross income in excess of Rs. 20,000 subject to a maximum half yearly tax of Rs. 1000. Provided further that when a company the head or principal office of which is not in City becomes liable to tax for the first time, it shall pay in the first year a tax of Rs. 25, but if the gross income of the company during such year is subsequently found to have exceeded Rs. 5,000, it shall pay the tax calculated in accordance with the abovementioned scale less the initial payment of Rs. 25."
(3.) The contention of the company that it is not transacting any business in the city can be easily disposed of According to the company the only transaction which the company's agent looks after in the city is receiving tobacco from upcountry and sending the same to Bangalore for exporting the same to England. The goods, therefore, merely pass through Madras and the representative of the company looks after the receipt and the transmission of the goods. The establishment, therefore, does not earn any income as such. Assuming that these facts are true, nevertheless the company must be held to be transacting business in the city because of the wide definition of that expression under Section 113. Even acts of receiving and transmitting of goods would fall within the expression "transacting business". We agree with the learned Chief Judge that the company cannot escape from liability to pay company tax. Council, Corporation of Madras (06.10.19... Page 4 of 5;

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