PETITIONER: LAKSHMINARAYAN RAM GOPALAND SON LTD.
RESPONDENT: THE GOVERNMENT OF HYDERABAD.
DATE OF JUDGMENT: 01/04/1954
BENCH: BHAGWATI, NATWARLAL H.
BENCH: BHAGWATI, NATWARLAL H.
DAS, SUDHI RANJAN
CITATION: 1954 AIR 364 1955 SCR 393
CITATOR INFO : RF 1954 SC 470 (65)
R 1957 SC 846 (8,13)
RF 1957 SC 852 (31)
F 1960 SC1269 (6,7)
R 1960 SC1279 (8)
MV 1966 SC 843 (66)
R 1966 SC1514 (13)
RF 1973 SC 637 (9)
RF 1977 SC1677 (5)
ACT: Master and Servant-Principal and Agent-Distinction between
-Hyderabad Excess Profits Tax Regulation-Activities which constitute business-Remuneration which constitutes income, profits or gains from business.
JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 292 and 312 of 1950.
Appeals from the Judgment and Order of the High Court of Judicature at Hyderabad (Ansari, Qamar Hasan and Manohar Pershad JJ.) in Cases Nos. 180-181 of 1954 F.
Ved Vyas, (S. K. Kapur and Ganpat Rai, with him) for the appellant.
M. C. Setalvad, Attorney-General for India (Porus A. Mehta, with him) for the respondent.
1954. April 1. The Judgment of the Court was delivered by
BHAGWATI J.-These are two appeals from the judgment and decision of the High Court of Judicature at Hyderabad answering certain questions referred at the instance of the appellants by the Commissioner of Excess Profits Tax, Hyderabad, and adjudging the liability of the appellants for excess profits tax in regard to the amounts recieved by them as remuneration from the Dewan Bahadur Ramgopal Mills Com- pany Ltd. as its Agents.
The Mills Company was registered on the 14th February, 1920, at Hyderabad in the then territories of His Exalted Highness the Nizam. The appellants were registered as a private limited company at Bombay on 395
agreement was entered into between the Mills Company. and the appellants appointing the appellants its Agents for a period of 30 years on certain terms and conditions therein recorded. The appellants throughout worked only as the Agents of the Mills Company and for the Fasli years 1351 and 1352 they received their remuneration under the terms of the Agency agreement. A notice was issued under section 13 of the Hyderabad Excess Profits Tax Regulation by the Excess Profits Tax Officer calling upon the appellants to pay the, amount of tax appertaining to these chargeable account- , ing periods. The appellants submitted their accounts and contended that the remuneration received by them from the Mills Company was not taxable on the ground that it is was not income, profits or gains from business and was outside the pale of the Excess Profits Tax Regulation. This contention of the appellants was negatived and on the 24th April, 1944, the Excess Profits Tax Officer made an order assessing the income of the appellants for the accounting periods 1351 and 1352 Fasli at Rs. 8,957 and Rs. 83,768 respectively and assessed the tax accordingly. An appeal was taken by the appellants to the Deputy Commissioner of Excess Profits Tax who disallowed the same. An application made by the appellants under section 48(2) for statement of the case to the High Court was rejected by the Commissioner and the appellants filed a petition to the High Court under section 48(3) to compel the Commissioner to state the case to the High Court. An order was made by the High,Court on this petition directing the Commissioner to state the case and the statement of the case was submitted by the Commis- sioner on the 26th February, 1946. Four questions were referred by the Commissioner to the High Courts as under:- (1) Whether the Petitioner Company is a partnership firm or a registered firm ?
(2) Whether under the terms of the agreement the petitioner is an employee of the Mills Company or is carrying on business ?
396 (3)Whether the remuneration received from the MILLs is on account of service or is the remuneration for business ?
(4)Whether the principle of personal qualification referred to in section 2, clause (4), of the Excess Profits Regulation is applicable to the Petitioner Company ?
These questions were of considerable importance and were referred for decision to the Full Bench of the High Court.
The Full Bench of the High Court delivered their judgment the majority deciding the questions (2) and (3) which were the only questions considered determinative of the reference against the appellants. The appellants appealed to the Judicial Committee. But before the Judicial Committee heard the appeals there was a merger of the territories of Hyderabad with India. The appeals finally came for hearing before the Supreme Court Bench at Hyderabad on the 12th December, 1950, when an order was passed transferring the appeals to this Court at Delhi. These appeals have now come for hearing and final disposal before us.
The questions (1) and (4) which were referred by the Commissioner to the High Court at Hyderabad have not been seriously pressed before us. Whether the appellants are a partnership firm or a registered company the principle of exclusion of the income from the category of business income by reason of its depending wholly or mainly on the personal qualifications of the assessee would not apply because the income could not be said to be income from profession and neither a partnership firm nor a registered company as such could be said to be possessed of any personal qualifications in the matter of the acquisition of that income.
The principal questions which were therefore argued before the High Court at Hyderabad and before us were the questions (2) and (3) which involved the determination of the position of the appellants whether they were servants or agents of the Mills Company and the determination of the character of their remuneration whether it was wages or salary or income, profits or gains from business.
397 The appellants were registered as a private limited company having their registered office in Bombay and the objects for which they were incorporated were the following: (1)To act as agents for Governments or Authorities or for any bankers, manufacturers, merchants, shippers, Joint Stock Companies and others and carry on all kinds of...