Venkatarama Ayyar, J. - (1.) This is an appeal by the Sales Tax Officer, Pilibhit, against the judgment of the High Court of Allahabad granting firstly, a writ of 'certiorari' quashing certain assessment orders made against the respondent, and secondly, a writ of prohibition in respect of certain other proceedings for assessment of tax under the provisions of the U. P. Sales Tax Act (Act XV of 1948). The respondent is a firm doing business in forward contracts, and was assessed in respect of such contracts to a tax of Rs. 1,082-8-0 for the year 1948-1949 by an order dated 27-2-1950, Ex. A, and to a tax of Rs. 7,369 for the year 1949-1950 by an order dated 23-5-1950, Exhibit B. For the period, 1-4-1950 to 31-1-1951, the respondent paid a sum of Rs. 845-4-0 as tax. Assessment proceedings were also started by the appellant in respect of certain forward contracts relating to gur and peas. The respondent challenged the legality of these proceedings and of the assessment orders on the ground that the Act in so far as it imposed a tax on forward contracts was 'ultra vires' the powers of the Provincial Legislature. The learned Judges agreed with this contention, and issued a writ of 'certiorari' quashing the orders of assessment, Exhibits A and B and a writ of prohibition in respect of the proceedings for assessment of tax on forward contracts in gur and peas. The matter now comes before us in appeal under a certificate of the High Court under Article 133 (1) of the Constitution.
(2.) Under the Government of India Act, 1935, the Provincial Legislature derived its power to impose a tax on the sale of goods under Entry 48 in List II of the Seventh Schedule, and the U. P. Sales Tax Act XV of 1948 was enacted in exercise of this power. Section 2(h) of the Act defines "sale" as follows: "Sale' means within its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration and 'includes forward contracts' but does not include a mortgage, hypothecation, charge or pledge." It is the extend definition of sale as including forward contracts in this section that is relied in as conferring authority on the appellant to make the orders in Exhibits A and B. The point for decision in this appeal is whether the power to impose a tax on the sale of goods under Entry 48 includes a power to impose a tax on forward contracts.
(3.) Under the statute law on the subject, a sale of goods and an agreement for the sale of goods are treated as two distinct and separate matters. Section 4 of the Indian Sale of Goods Act (Act III of 1930) runs as follows: "(1) A contract for sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." It will be noticed that though the section groups both sales and agreements to sell under the single generic name of "contracts of sale", following in this respect the scheme of the English Sale of Goods Act, 1893, it treats them as separate categories, the vital point of distinction between them being that whereas in a sale there is a transfer of property in the goods from the seller to the buyer, there is none in an agreement to sell. When the contract is to sell future goods and under section 6 (3) of the Sale of Goods Act even if "the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods", there can be no transfer of title to the goods until they actually come into existence; and even then, the conditions laid down in section 23 of the Act should be satisfied before the property in the goods can pass. That was also the law under the repealed provisions in Chapter VII of the Indian Contract Act, 1872. Section 77 of the Contract Act defined "sale" as follows: "Sale' is the exchange of property for a price. It involves the transfer of the ownership of the thing sold from the seller to the buyer." Section 79 enacted that, "Where there is a contract for the sale of thing which has yet to be ascertained, made or finished, the ownership of the thing is not transferred to the buyer, until it is ascertained, made or finished.";