GULATI, J. - (1.) THE Additional Judge (Revisions) Sales Tax, Agra, has submitted this reference at the instance of the Commissioner of Sales Tax, U.P., Lucknow, under section 11(3) of the U.P. Sales Tax Act and invited the opinion of this court on the following question of law : "Whether sales made through the commission agents can be added to the other turnover of the assessee for purposes of fixing his gross sales ?"
(2.) THE assessee is a dealer in food-grains, oil-seeds and gur. In respect of assessment yeas 1960-61 and 1961-62 it filed returns of its turnover showing gross sales of Rs. 4,368 and Rs. 3,773 for the two years respectively. These figures were not accepted by the Sales Tax Officer and were enhanced to Rs. 6,583 and Rs. 10,383 for the two years respectively. Even the enhanced figures of sales are below the minimum taxable limit which is Rs. 12,000 per year. The assessee would, therefore, have not been liable to any tax. The assessee, however, had made certain sales through commission agents and the extent of such sales was Rs. 24,000 for the year 1960-61 and Rs. 21,000 for the year 1961-62. If the sales made through the commission agents are also added to the turnover of the assessee, the assessee becomes liable to tax. It appears that the sales made through the commission agents were not included in the assessee's net turnover labial to sales tax but were included in the assessee's gross turnover with a view to levy tax on the sales effected by the assessee directly. The question is as to whether this could be done under the law. Section 3 which is the charging section provides that every dealer shall for each assessment year pay the tax at the rate of 2 naye paise per rupee on his turnover provided the turnover exceeds Rs. 12,000. The dealer has been defined in section 2(c) of the Act to mean "any person ...... carrying on the business of buying or selling goods in Uttar Pradesh" and according to the explanation attached to that provision "a factor, a broker, a commission agent or arhati, ..... or any other mercantile agent by whatever name called .... who carries on the business of buying and selling goods on behalf of his principals, or through whom the goods are sold or purchased shall be deemed to be a dealer for the purposes of this Act." The word "turnover" according to its definition under section 2(1) means "the aggregate amount for which goods are supplied or distributed by way of sale ... either directly or through another on his account or on account of others." According to the definition of a dealer and of turnover as given in the Act where goods are sold through a commission agent, the principal and the commission agent bother become dealers so that tax can be levied on either of them. At the end of section 3, however, there is an explanation which says that where tax is payable and has been so paid by the commission agent on any turnover on behalf of his principal, the principal shall not be liable to pay the tax in respect of the same turnover. This means that if a particular turnover has been assessed in the hands of the commission agent, the principal ceases to be liable to tax on such turnover. In other words, a principal is granted exemption from tax where his turnover is assessed in the hands of the commission agent. Rule 8 of the Rules framed under the Act is headed "liability to pay tax" and provides "a dealer's liability to pay tax under the Act shall be determined on the basis of his gross turnover." "Gross turnover" means the proceeds of the sales effected by a dealer whether directly or through a commission agent. It follows, therefore, that in order to determine the gross turnover of a dealer, all sales effected by him will have to be aggregated even though the tax would be levied only upon the net turnover, which means the turnover liable to tax, so that a part of the turnover, which is exempted by any of the provisions of the Act, shall have to be excluded from the levy of the tax. From the question referred, it appears that the department is not proceeding to levy tax on the turnover effected through the commission agents, presumably on the basis that such turnover has either been assessed in the hands of the commission agents or it is so assessable.
(3.) A Division Bench of this court in Commissioner of Sales Tax, U.P., Lucknow v. Balbir Singh and Co. ([1963] 14 S.T.C. 546) was called upon to answer the following question : "Whether the sales of the opposite party M/s. Balbir Singh and Co., 21, A.P. Sen Road, Lucknow, made by them in the capacity of a commission agent would be included in their gross turnover in order to determine their liability to tax." ;