Mecleod & Co. Ltd. Vs. State of
Orissa & Ors [1983] INSC 185 (23 November 1983)
TULZAPURKAR, V.D.
TULZAPURKAR, V.D.
PATHAK, R.S.
MUKHARJI, SABYASACHI (J)
CITATION: 1984 AIR 590 1984 SCR (1) 865 1984
SCC (1) 434 1983 SCALE (2)750
ACT:
Orissa Taxation (on Goods carried by Road and
Inland Waterways) Act, 1959 validated by Act of 1968-S. 2(5)-Read with
explanation thereto-Definition of dealer-Interpretation of. Manager or agent of
non-resident dealer need not have place of business or residence in Orissa State
to be deemed to be dealer. Dealer-Whether nonresident Dealer-Test for
determining residence.
HEADNOTE:
The appellant-company was appointed as
'Managing Agent' and Secretary & Treasurer' respectively by two independent
and separate public limited jute mills companies. These jute mills had their
registered office at Calcutta and additional places of business in several
parts of the country including Kendupatna in the State of Orissa and were
registered as 'dealers' under the orissa Taxation (on Goods carried by Road and
Inland Waterways) Act, 1959. The appellant-company did not do any business nor
had any place of its business in any part of the State of Orissa. . But the
appellant-company looked after the work of storing jute of the two jute mills in
their godowns at Kendupatna in the State of Orissa. The Assistant Tax-officer
passed ex-parte assessment orders against the appellant-company on the business
of stocking, storing and carrying jute by boats of the jute mills in the State
of Orissa on the basis that the appellant-company was a `dealer' (as agent of
both the jute mills) within the meaning of s. 2(5) read with the Explanation
thereto of the Act. The Assistant Commissioner of Taxes dismissed the appeal
and Commissioner of Taxes dismissed the revision petition filed by the
appellant-company against the assessment orders. In a writ petition, the High
Court negatived the contention of the appellant-company that it was not a
dealer. In this appeal, the appellant- company contended: (I) that in order to
be deemed to be a dealer under s. 2(5) read with Explanation thereto a manager
or an agent of a dealer must reside or have a place of business in the State of
Orissa and since the appellant-company did not have any such place of business
in the State of Orissa it was not a dealer under that section, and (2) that the
jute companies (Principals) were not non-resident dealers' as required by the
Explanation to s. 2(5) since each one had a place of business of its own in the
State of Orissa.
Dismissing the appeal,
HELD: The appellant-company was a dealer
within the meaning of s. 2(S) read with the Explanation thereto of the Orissa
Taxation (on Goods carried by Road and Inland Waterways) Act, 1959. [876 E] 866
Under the Explanation to s. 2(5) of the Act, the manager or agent of a 'dealer'
who resides outside the State is also deemed to be a 'dealer' for the purpose
of the Act irrespective of whether he resides inside or outside the State. The
artificial definition of a 'dealer' under the Explanation is merely an enabling
provision which facilitates the assessment against a non-resident dealer but
the provision does not require that the manager of the agent should have either
a residence or a place of business within the State of Orissa. There is nothing
either in the main definition or in the Explanation to suggest that the manager
or agent of the dealer (Principal) should have his own business within the
State of Orissa before he could be proceeded against or assessed under the Act.
All that the Explanation requires is that the manager or the agent should store
such goods of the non-resident `dealer' within the State of orissa but that
does not mean that for such purpose the manager or the agent either reside or
have a place of business within the State of orissa; even if he carries out the
operation of storing the goods and carrying the same by.
motor boats within the State of Orissa from
outside the State it would suffice. [871 G-H; F; 872 B-C] In the instant case,
it is true that during the relevant period it was the jute companies (the
Principals) who carried on their jute business at Kendupatna within the State
of Orissa and that the appellant-company had n business of its own anywhere in
that State but it was looking after the business of the Principals as their
agent at Kendupatna and such business included the operation of stocking or
storing of jute in their godowns at Kendupatna and carrying the same by motor
boats. [871 C-D] In respect of an artificial person like a company the test to
determine its residence will have to be considered in the context of the law
prescribing the criteria in that behalf. So far as law of taxation is
concerned, ordinarily the residence of a company will be at the place where the
actual management of the company is carried on and that if this is done at
several places it may have a dual residence but in that case at least some part
of the superior and directing authority of the company must be present at the
place where its residence is sought to be established. [873 A; 874 F-G]
Palmer's Company Law (23rd-Ed.) Vol. I at pages 101 to 103, referred to.
The test of residence is not registration,
but where the company docs its real business, where the central management and
control abides. It is the actual place of management of the company and not the
place where it ought to be managed which fixes its residence. [875 B] Buckley
on the Companies Act (14th Edn.), Vol. I at pages 299; Egyptian Delta and
Investment Co. v. Todd., [1929] A. C. I and De Beers Consolidated Mines v. Howe,
[1906] A. C. 455 referred to.
In the instant case both the principals (the
jute companies) had their registered offices in Calcutta (West Bengal), that
their principal businesses were carried on in Calcutta (West Bengal) and that
the Central management and 867 control of the businesses was done from
Calcutta. It is true that these two Jute companies had storage equipment and
godowns at Kendupatna in the States of Orissa but on their own showing (vide
Certificates of Registration) at Kendupatna they had 'additional places of
businesses'. As the central management and control of the two companies'
businesses obtained in Calcutta (West Bengal), the two jute companies would be
non-resident dealers in the State of orissa. [876 A-D]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 43 of 1972.
Appeal by Special leave from the Judgment and
order dated the 16th April, 1971 of the Orissa High Court in O.J.C. No. 24 of
66.
V. S. Desai, S. Bhandare and T. Sridharan
with him for the Appellant.
Govinda Mukhoty, G. S. Chatterjee and Sujeet
K Bhattacharya for the Respondents.
The Judgment of the Court was delivered by
TULZAPURKAR, J. This appeal by special leave raises the question whether the
appellant-company could be regarded as a 'dealer' within the meaning of sec.2(5)
read with the Explanation thereto of the Orissa Taxation (on goods carried by
Road and Inland Waterways) Act, 1959 (hereinafter referred to as the Orissa
Taxation Act and which was validated by Act of 1968) and as such was liable to
be assessed under the Act for the quarters covering the period 30-9-1960 to
31-3-1962 ? The question which pertains to the proper interpretation of the
aforesaid provisions of the Act arises in the following circumstances.
Nellimarla Jute Mills Co. Ltd., and
Chitavalsah Jute Mills Co. Ltd. are two independent and separate companies
having their registered offices at Mecleod House, 3, Netaji Subhas Road,
Calcutta and additional places of business in several part of the country
including one at Kendupatna, P.O. Kendupatna, District Cuttack, in the State of
Orissa.
These two public Limited Companies primarily
carried on the business of jute manufacturing and owned jute mills in different
parts of the country, such as, Nellimarla Jute Mills Co. Ltd,. Owing Jute Mills
at Elore in Andhra Pradesh and Chitavalsah Jute Mills Co. Ltd. Owing Jute Mills
at Chitavalsah in Andhra Pradesh. The appellant-company (M/s. Mecleod & Co.
Ltd. having its Registered office at Mecleod House, 3, Netaji Subhas Road,
Calcutta), by 868 virtue of Agreements with the said two jute mills was
appointed the 'Managing Agent' for Chitavalsah Jute Mills Co. Ltd. and the
'Secretary & Treasurer' for Nellimarla Jute Mills Co. Ltd. The
appellant-company did not do any business nor had any place of its business in
any part of the State of Orissa But as the Managing Agent of Chitavalsah and as
the Secretary and Treasurer of Nellimara looked after the work of storing their
jute in their godowns at Kendupatna, District Cuttack, State of Orissa. It may
be stated that under cl.(4) of the Agreement dated 7-10-1960 with Nellimarla
the appellant-company was precluded from and was "not entitled (unless and
except to the extent they are authorised by the Board of Directors) to sell any
goods or articles manufactured or produced by the Company or to purchase,
obtain, or acquire machinery stores, goods or materials for the purposes of the
Company or to sell the same." In other words, the prohibition contained in
cl.(4) of the Agreement with Nellimarla merely pertained to selling or
purchasing of goods or materials for the purposes of the company but left
intact the appellant-company's powers to store jute of the Company in its
godowns at Kendupatna in the State of Orissa.
Since the two jute mills carried on the trade
of purchasing and storing of jute, inter alia at Kendupatna, they were
registered as ' Dealers' under the Orissa Taxation Act and the Rules framed
thereunder. Each one having a separate Registration Certificate. It may be
stated that Nellimarra had filed Returns of their turn-over for all the
quarters from 30-9-1959 to 30-6-196'' and had paid the admitted tax for the
said period under the Act. Similarly, ChitavaIsah had filed Returns of their
turn-over for all quarters from 30-9-1959 to 31-3-1960 and had paid the admitted
tax for the said period under the Act. It appears that thereafter some time in
1963 the said jute companies filed writ petitions in the Orissa High Court
under Art 226 of the Constitution challenging the validity of the original Act
of 1959 as also the Validation Act of 1968 and obtained interim stay of
proceedings under the said Act but we were informed by counsel that ultimately
the challenge to the validity of the Acts failed; however, we are not concerned
with those proceedings in this appeal. In the meanwhile, seven ex parte
assessment orders were passed against the appellant-company by the Assistant
Tax officer for quarters covering the period from 30-9-1960 to 31-3 1962 on the
business of the said two companies on the basis that appellant-company was a
'dealer' (as agent of both the companies) within the 869 meaning of sec.2(5)
read with the Explanation thereto and had carried on the business of stocking
or storing jute and carrying the same by motor boats at Kendupatna in District
Cuttack, State of Orissa and the appellant-company received a notice of demand
along with the said assessment orders claiming a total amount of Rs. 74,125
inclusive of penalty.
Against the said assessment orders the
appellant-company preferred appeals under sec.12(1) of the Act to the Assistant
Commissioner of Taxes but the. appeals failed. The appellant-company preferred
revisions under sec.12(3) of the Act to the Commissioner of Taxes, Orissa but
the Commissioner of Taxes by his order dated 15th October, 1965 dismissed
the-revisions and confirmed the Assessment orders made against the
appellant-company. Aggrieved by the order of the Commissioner of Taxes the
appellant-company approached the High Court by means of a Writ Petition under
Art.226 of the Constitution and challenged the assessments made against them on
the basis that as agent of the two Jute Companies it was not a 'Dealer' within
the meaning of sec.2(5) read with the Explanation thereto of the Orissa
Taxation Act. The assessment orders were also challenged on the ground that
these had been passed without following the principles of natural justice
inasmuch as the appellant- company had no opportunity to meet the materials,
particularly the Inspectors Report relied upon by the Assistant Taxing officer
while making the assessments. The High Court by its judgment dated 16th April,
1971 negatived the appellant-company's principal contention that it could not
be regarded as a 'Dealer' within the meaning af sec.2(5) read with Explanation
thereto of the Act and therefore it could not be assessed at all under the Act
but set aside the assessment orders and remanded the assessment proceedings to
the taxing authority to pass fresh orders on the ground that through notice of
the assessment proceedings had actually been served on the appellant-company
the assessment orders had been made arbitrarily without the appellant-company
getting a reasonable opportunity of meeting or explaining the materials in the
Inspector's Report which had been relied upon by the Assessing officer for
making the assessment. Though the matter has been remanded by the High Court
for fresh assessment, the principal contention or the appellant-company which
goes to the root of the matter having been negatived by the High Court the
appellant- company has preferred this appeal to this Court challenging the High
Court's view thereon.
870 Counsel for the appellant-company put
forward a couple of contentions in support of his case that on the facts and
circumstances obtaining here in regard to the business of stocking or storing
their jute and transporting the same by motor boats within the State of Orissa
which was done by the two jute companies at Kendupatna in District Cuttack, the
two jute companies (the Principals) who had registered themselves as 'dealers'
under the Act could be assessed by the taxing authorities and not the
appellant-company who was not a 'dealer' as defined by sec.2(5) read with the
explanation thereto of the Act. In the first place Counsel urged that though it
was true that the appellant-company was acting as the agent of the two jute
companies during the relevant quarters it did not have any place of business
either at Kendupatna or anywhere else in the State of Orissa and unless it had
such place of business in the State of orissa which could facilitate the
assessment, the appellant- company could not be proceeded against or assessed.
In other words, the . submission was that under the Explanation an artificial
definition of a 'dealer' by means of a deeming clause had been provided with
the object of facilitating the assessment proceedings against non-resident
principals which could not be achieved if the agent was also a nonresident in
the State of orissa, Secondly, counsel contended that jute companies
(Principals) were not 'non-resident dealer' as required . by the Explanation
since each one had a place of business of its own at Kendupatna District
Cuttack. Relying on these aspects counsel for the appellant company contended
that on true construction of - the relevant provision the appellant company
could not be held to be a dealer and as such the assessing authority had no
jurisdiction or power to proceed against or assess the appellant-company in
respect of the business of the principals (the jute companies). For the reasons
which we shall indicate presently we do not find any substance in either of the
contentions and both these are liable to be rejected Obviously the two
contentions urged by counsel for the appellant-company have a bearing on the
proper construction to be placed on sec.2(5) read with the Explanation of the
Orissa Taxation Act; It was not disputed before us that under the charging
provision contained in sec.3 of the Act the Taxing event is the carriage of
jute and other articles by motor vehicle, cart, trolley, boat etc. within the
State of Orissa and the liability to be assessed in that behalf under the
provisions of the Act has been laid upon a 'dealer' as defined in sec.2(5) and
the Explanation thereto of the Act. Section 2(5) and the Explanation thereto
run as under:
871 "2(5) "Dealer" means any
person who stores at one time jute in excess of fifty maunds or bamboos in
excess of one thousand in number or kendu leaves in excess of one standard
maund or minerals and mineral ores before or after being carried by motor
vehicle, cart, trolley, boat, animal or human agency or any other means except
railways or airways and includes his agent:
Explanation: The manager or agent of a dealer
who resides outside Orissa and who stores such goods shall be deemed to be a
dealer for the purpose of this Act." lt is true that during the relevant
quarters covering the period from 30-9-1960 to 31-3-1962 it was the jute
companies (the Principals) who carried on their jute business at Kendupatna
within the State of Orissa and that the appellant-company had no business of
its own anywhere in that State but it was looking after the business of the
Principals as their agent at Kendupatna and such business included the
operation of stocking or storing of jute in their godowns at Kendupatna and
carrying the same by motor boats but there is nothing either in the main
definition or in the Explanation to suggest that the manager or agent of the
dealer (Principal) should have his own business within the State of Orissa
before he could be proceeded against or assessed under the Act. In our view it
would be sufficient if the manager or agent of a non-resident dealer looks
after the operation of stocking or storing the jute of that non- resident
dealer and carrying the same by motor boats etc. within the State of Orissa.
Apart from this aspect of the matter, the main thrust of Counsel's contention
has been that the manager or agent should at least reside or have a place of
business within the State of orissa before he could be proceeded against or assessed
under the Act. On a plain reading of the explanation that clearly is not a
requirement qua the manager or agent. Under the Explanation the manager or
agent of a 'dealer' who resides outside the State is also deemed to be a
'dealer' for the purpose of the Act irrespective-of whether he resides inside
or out- side the State! In other words the place of residence or of business of
the manager or the agent is utterly irrelevant. The artificial definition of a
'dealer' under the Explanation is merely an enabling provision which
facilitates the assessment against a non-resident dealer but the provision does
not require that the manager or the agent should have either a residence or a
place of business within the State of Orissa. Emphasis was laid by Counsel on
the phrase 'who 872 stores such goods' occurring in the Explanation as
referring to manager or agent and it was submitted that the said phrase
suggests that the manager or the agent should have either residence or place of
business within the State of Orissa. It is not possible to accept this
submission for the reason that all that the Explanation requires is that the
manager or the agent should store such goods of the non- resident 'dealer'
within the State of orissa but that does not mean that for such purpose the
manager or the agent must either reside or have a place of business within the
State of Orissa; even if he carries out the operation of storing the goods and
carrying the same by motor boats within the State of Orissa from outside the
State it would suffice. On a fair reading of the main definition together with
the Explanation it seems to us quite clear that the concept of residence or
non-residence is relevant qua the principal who must be a non-residence dealer
before his manager or agent could be proceeded against or assessed under the
act and it is not the requirement of the provision that the manager or the
agent of a non-resident 'dealer' should have either residence or the place of
business within the State of Orissa.
The next submission of Counsel for the
appellant- company has been that the two principals namely Nellimarla and
Chitavalsah who are 'dealers' falling within the main definition could not be
said to be non-resident dealers because in the case of a company, unlike an individual
every place where it carries on its business would be a place of its residence
and since admittedly each carried on business at certain places at Kendupatna
in the State of Orissa during the relevant quarters it could not be said that
they had been residing outside p the State. Elaborating this contention Counsel
pointed out that the residence of a company must be distinguished from its
nationality and domicile. According to Counsel the place of registered office
of a company would be relevant for determining its nationality or domicile but
it does not determine the residence. Counsel pointed out that in law a company
may have a dual residence or multiple : residences depending upon at how many
places it carries on its businesses and this aspect of the company's residence
assumes considerable relevance in the context of tax laws and since here the
two jute companies (the Principals) had also places of business within the
State of Orissa, apart from having their registered offices in Calcutta, they
could be regarded as having their residences within the State of orissa and as
such could not be regarded as non-resident 'dealer'.
873 It is true that in respect of an
artificial person like a company the test to determine its residence will have
to be considered in the context of the Law prescribing the criteria in that
behalf and would be different from the test that determine its nationality or
domicile. In Palmer's Company Law (23rd Edn) Vol.I these three concepts in
relation to a company have been dealt with in paragraphs 8.10, 8.11 at pages
101 to 103 thus:
8. 10 Nationality, domicile and residence of
company the situation of the registered office determines the nationality and
domicile of the company but it does not determine its residence. Where legal
rules use these criteria and it is obvious that the rules have to be applied to
legal persons, it becomes necessary to apply these criteria by way of analogy
from the case of natural persons. It is obvious that a corporation can no more
have a domicile or residence than it can marry or have children. On the other
hand, effect must be given to the legal prescript, which is clearly intended to
cover the case of the artificial person as well as that of the natural person.
Here the task of the courts is to interpret the enactment in question in
relation to the artificial person..............
...................
Nationality The nationality of a company is
determined by the law of the country in which it is incorporated and from which
it derives its personality.
In English law, nationality is rarely adopted
as a legal test.
Domicile The place of registration is
like-wise the domicile of a company, and this domicile clings to it throughout
its existence. It is, however, possible that by operation of the law of the
Company's domicile, another system of law may be substituted for the law of the
place of registration.
874 Unlike an individual, a company cannot
have a domicile of choice.
Residence 8.11 The residence of a company is
not as easily established as its nationality or its domicile. The test of
residence is mainly used if questions pertaining to taxation, the character of
the company as an overseas trading corporation, service of process on the
company and attribution of enemy character to the company arise. In these
cases, the residence of the company is not determined by the application of a
uniform test but a different meaning is given to those words in each of them.
Moreover, a company-like an individual-may have several residences at the same
time, whereas it can have one domicile and one nationality only.
Tax Law 8.12 In tax law a company is
ordinarily resident where the actual management of the company is carried on,
even though it ought to be managed elsewhere according to its constitution. If
this is done at several places, the company has a dual residence (or possibly
even more residences), but in that case at least some part of the superior and
directing authority of the company must be present in the country in which it
is sought to establish the residence of the company.
From what is stated above it will be clear
that so far as law of taxation is concerned-and in the instant case we are
concerned with tax law, namely, the Orissa Taxation Act- ordinarily the
residence of a company win be at the place where the actual management of the
company is carried on and that if this is done at several places it may have a
dual residence but in that case at least some part of the superior and
directing authority of the company must be present at the place where its
residence is sought to be established.
In Buckly on the Companies Act (14th Edn.),
Vol.1 at page 299 the following passage occurs i 875 For the purpose of the
Income Tax Acts, the place of registration of a company is not, any more than
the birth place of an individual, conclusive as to its 'residence'. A company
registered here (in England), with a registered office here, (in England) and
governed by a board which meets here, is no doubt resident here. But also a
company registered abroad, whose head office and directors' meeting are here,
is resident here. The test of residence is not registration, but where the
company does its real business, where the central management and control
abides. It is the actual place of management of the company and not the place
where it ought to be managed which fixes its residence." C The underlined
portion in the passage quoted from Buckley is based on the decision of the
House of Lords in the leading case of Egyptian Delta Land and Investment Co. v.
Todd. In that case the company was incorporated in England, had its registered
office in England and fulfilled its statutory obligations in that country but
1) had transferred the whole of its business to Egypt which was entirely
controlled and managed from Cairo where the director and the secretary
permanently resided and the question arose whether for the purposes of Income
Tax Acts the company could be regarded as a resident: in England'.
After exhaustive survey of the earlier case
law on the point the House of Lord took the view that the incorporation under
the Companies. Acts, with the attendant statutory obligations did not in
itself, as a matter of law, constitute a British company a person residing in
the United Kingdom within the meaning of the Income Tax Acts; that it was
merely a factor to be considered in determining residence, and was a matter for
the Commissioners to decide.
lt also took the view that it was settled by
authority that the residence of a company, whether British or foreign, for
income tax purposes was, preponderantly and if not exclusively, determined by
the place where its real business was carried on and since the whole of the
company's business was controlled from Cairo the company was not resident in
England and it upheld the Commissioners' decision of discharging the
assessments. In taking the aforesaid view the House of Lords approved and
followed the criteria that had been laid down in an earlier decision in the
case of De Beers Consolidated Mines v. Howe to the effect "the test of residence
is 876 not registration but where the company does its real business, where the
central management and control abides." Applying the aforesaid criteria to
the facts of the present case it was not disputed before us that both the
principals (the jute companies) had their registered offices in Calcutta (West
Bengal), that their principal businesses were carried on in Calcutta (West
Bengal) and that the central management and control of the businesses was done
from Calcutta It is true that these two jute companies had storage equipment
and godowns at Kendupatna in the State of Orissa but on their awn showing (vide
certificates of Registration? at Kendupatna they had 'additional places of
businesses'. It was not even the appellant company's case that the central
management and the control of the two jute companies' businesses was in the
State of orissa. The test laid down in the House of Lords' decision does not
suggest that at every place where some business of the company is carried on it
shall have its residence there. As pointed out above, the central management
and control of the two companies' businesses obtained in Calcutta (West Bengal)
and that being the position the two jute companies would be nonresident dealers
in the State of Orissa. The second contention of the counsel for the appellant
company, therefore, fails.
In the result we are of the view that the
High Court was right in coming to the conclusion that the appellant- company
was a dealer within the meaning of s.2(5) read with the Explanation thereto of
the Orissa Taxation Act, 1959.
The appeal is, therefore, dismissed with
costs .
H.S.K. Appeal dismissed.
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