COMMISSIONER CORPORATION OF MADRAS Vs. GODREJ SOAPS PRIVATE LIMITED

JUDGEMENT

(1.) THESE connected civil revision petitions which relate tot he assessment to tax by Corporation of Madras against the respondent company for six half years raise a common question as to the rate of tax payable. Godrej Soaps (Private) Ltd. is a company registered under the Companies Act, 1913, whose head to principal office is not is the City of Madras. There is, however, a branch office of the company at Madras. In respect of the business done in Andhra Pradesh and Kerala State all moneys come to the Madras office and then they are transmitted to the head office at Bombay. In the matter of levy of the tax on companies, the Corporation of Madras sought to levy the the tax on the gross income derived by the Madras branch including therein income derived from the business done in Andhra Pradesh and kerala State which passed through the Madras branch office. Reversing the view taken by the Taxation Appeals Committee of the Corporation, the Chief Judge of the court of Small Causes, Madras, held that the respondent can be assessed to companies' tax only on the in come derived from the business done at Madras and not on the income arising or accruing form business done outside the city of Madras. Under section 110 of the City Municipal Act, tax is livable on companies transacting business within the city in any half year for not less than sixty days in the aggregate. The under the section would be assessed in accordance with rules in Schedule IV. Section 113 defines the expression "transacts business

(2.) SCHEDULE IV of the Act which contains the rules for assessment to tax provides in rule 7 for assessment on companies on a graded scale proportionate to their paid-up capital. That applies to companies whose principal or head office is in the City of Madras. SEction 110 provides that the tax levied will not in any event be higher than Rs. 1, 000 . The proviso to rule 7 relates to cases where the principal or head office of the company is not situate with in the city. That provides for a graded scale of tax in accordance with the gross income "received in or from the city." The only point for consideration in the present case is whether moneys received as result of transactions done outside the City of Madras by the company but in respect of which the gross income came into the city and were in due course transmitted to the head office at Bombay, would come with in the term "received nor from the city". In Indian Leaf Tobacco Development Co. Ltd. v. Council of the Corporation of Madras 1, it was laid down that in order that a company can be said to be entitled to the benefits of the proviso to rule 7 of SCHEDULE Iv, it must establish two things, namely, (1) that its head to principal office is not in the city, and (2) that its gross income received nor from the city in the relative year had not exceeded a particular sum.