State of Punjab & ANR Vs. M/S.
Bajaj Electricals Ltd.  INSC 288 (5 December 1967)
05/12/1967 SHAH, J.C.
CITATION: 1968 AIR 739 1968 SCR (2) 636
Punjab Professions, Trades, Callings and
Employment Taxation Act, (Punj. 7 of 1956), s. 7-Supplying goods within State
against orders outside State--Supplier has no shop, branch or agent within
State-Liability to tax-"Trade", Meaning of.
The respondent a Joint Stock Company, having
no shop or office or agent within the State of Punjab, used to supply goods
within the State pursuant to orders received and accepted at New Delhi, and
also used to receive the price for the goods within the State. The Assessing
Authority, Kamal, assessed the respondent to profession tax under the Punjab
Professions, Trades, Callings and Employments Taxation Act, 1956. The order was
quashed by the High Court.
In appeal to this Court,
HELD : The activities of the respondent in
the State were mere ancillary activities and did not amount to carrying on
trade within the State. [538 C-D] The expression "trade" is not
defined in the Act. "Trade" in its primary meaning is the exchanging
of goods for goods or goods for money; in its secondary meaning it is repeated
activity in the nature of business carried oh with a profit motive, the
activity being manual or mercantile, as distinguished from the liberal arts or
learned professions or agriculture. The question whether trade is carried on by
a person at a given place, though one of mixed law and fact, must in each case
be determined on a consideration of the nature of the trade, the various steps
taken for carrying on the trade and other relevant facts. [537 H-538 E]
Grainger and Son v. Gough (Surveyor of Taxes) 3 T.C. 464, F.L. Smith & Co.
v. F. Greenwood (Survevor of Taxes), 8 T.C.
193 and Firestone Tyre Co. Ltd. v. Lewellin,
37 T.C. 111.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 287 of 1967.
Appeal from the judgment and order dated May
29, 1964 of the Punjab High Court in Civil Writ No. 1609 of 1961.
Harbans Singh and R. N. Sachthey, for the
The Judgment of the Court was delivered by
Shah, J. The respondents Joint Stock Company-has its principal place of
business in Bombay, and a branch office in New Delhi. The Assessing Authority,
Karnal, exercising power under the Punjab Professions, Trades, Callings and
Employments Taxation Act 7 of 1956, assessed the respondent to, profession tax
537 for the years 1960-61 and 1961-62 and issued a notice of demand for the
amount so assessed. The High Court of Punjab quashed the notices of demand and
the assessment orders holding that the respondent did not carry on trade within
the State of Punjab and was not liable to be assessed to tax under the Act. The
State of Punjab has appealed to this Court against the order of the High Court.
Section 3 of Act 7 of 1956 provides
"Every person who carries on trade, either by himself or by an agent or
representative, or who follows a profession or calling or who is in employment,
either wholly or in part, within the State of Punjab, shall be liable to pay
for each financial year or a part thereof a tax in respect of such profession,
trade, calling or employment.
The respondent, it is common ground, has no
branch office or any other place of business in the State of Punjab. It has
also not appointed any agent or representative to carry on business on its
behalf within the State. The respondent supplies goods to the Government of
Punjab and certain "semi-Government bodies" in the State in execution
of orders received at its branch office at Delhi. The goods are despatched from
Delhi by rail or by public motor transport.
Pursuant to the terms and conditions of the
"Rate Contract" between the respondent and the Controller of Stores
for the State of Punjab, the respondent consigns the goods sold by it to the
appropriate Government Department F.O.R. destination. Inspection of the goods
is made within the State of Punjab. The price for the goods sold is collected
by presenting bills or railway receipts through Banks to the consignees.
The Assessing Authority held that the
respondent "may reasonably be regarded as selling goods within" the
State of Punjab because it was supplying goods F.O.R. destination.
The High Court held that the respondent could
not in law be regarded as carrying, on trade at the place at which the goods
were supplied, merely because the railway or other receipts were taken out in
the name of the respondent and presented to the purchasers duly endorsed in
their favour to secure realization of the price of the goods.
Liability to pay tax under Act 7 of 1956
arises if a person carries on trade by himself, or through his agent, or
follows a profession or is in employment within the State, and not otherwise.
The expression "trade" is not defined in the Act. "Trade"
in its primary meaning is the exchanging of goods for goods or goods for money;
in its secondary meaning it is repeated activity in the 538 nature of business
carried on with a profit motive, the activity being manual or mercantile, as
distinguished from the liberal arts or learned professions or agriculture. The
question whether trade is carried on by a person at a given place must be
determined on a consideration of all the circumstances. No test or set of tests
which is or are decisive for all cases can be evolved for determining whether a
person carries on trade at a particular, place.
The question, though one of mixed law and
fact, must in each case be determined on a consideration of the nature of the
trade, the various steps taken for carrying on the trade and other relevant
In the present case, the respondent has no
shop or office within the State of Punjab. The respondent supplies goods within
the State pursuant to orders received and accepted at New Delhi, and also
receives price for the goods within the State. But these are ancillary
activities and do not in our judgment amount to carrying on trade within the
State of Punjab. We need not refer in detail to cases such as Grainger and Son
v. Gough (Surveyor of Taxes) (1); F. L.
Smith & Co. v. F. Greenwood (Surveyor of
Taxes)(2); and Firestone Tyre Co. Ltd v. Lewellin, (3) which interpret -the
expression "trade exercised within the United Kingdom" in the English
Income Tax Acts, for they merely lay down that for the purpose of the Income
Tax Acts, there is no single, decisive or "crucial" test to determine
whether the taxpayer exercises trade at a given place.
The appeal fails and is dismissed. The
respondent has not appeared at the hearing. There will, therefore, be no order
as to ,costs.
Y.P. Appeal dismissed (1) 3 T.C. 464.
(2) 8 T.C. 193.
(3) 37 T.C. 111.