Commission agency exemption turns on known principal and agreed remuneration; undisclosed retained amounts fall outside the tax relief.

Section 8 exempted commission agency transactions only where the dealer acted for a known principal, the principal was specified in the accounts, and the remuneration was confined to agreed commission or brokerage. On the buying side, rusum shown as part of transaction costs and passed through the agent was treated as a legitimate charge within the exemption, so the buying turnover was exempt. On the selling side, rusum collected from purchasers without proof that it was payable to the principal was treated as the agent's own profit and fell outside the exemption, so the selling turnover was taxable.

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Issues: (i) Whether commission agency purchases made on behalf of known principals, where the commission agent charged and passed on rusum as part of the agreed remuneration, fell within the exemption under Section 8 of the Madras Sales Tax Act, 1939. (ii) Whether commission agency sales, where the agent collected rusum from buyers without showing that it was payable to the principal seller, were exempt from sales tax under Section 8.

Issue (i): Whether commission agency purchases made on behalf of known principals, where the commission agent charged and passed on rusum as part of the agreed remuneration, fell within the exemption under Section 8 of the Madras Sales Tax Act, 1939.

Analysis: Section 8 exempted a dealer acting as a commission agent who bought or sold for known principals specified in the accounts in respect of each transaction and acted for an agreed commission or brokerage. On the buying side, the bulk of the rusum was shown to have been charged by sellers and passed through the commission agent to the buying principals as part of the transaction costs. The mere fact that the agent did not always remit every amount collected from buyers to sellers did not convert the whole turnover into taxable turnover, because the evidence supported the finding that the amounts were in substance part of the agreed commission or legitimate charges connected with the purchase transactions.

Conclusion: The buying agency turnover was exempt and the revenue could not levy sales tax on it.

Issue (ii): Whether commission agency sales, where the agent collected rusum from buyers without showing that it was payable to the principal seller, were exempt from sales tax under Section 8.

Analysis: The selling side stood on a different footing. The accounts showed that rusum was collected from purchasers, but there was no material to show that the principal sellers had agreed to such collection or that the amount was passed on to them. In that situation, the rusum was not a legitimate passed-through charge or an agreed commission within Section 8, but a sum retained by the commission agent and added to its own profit. The statutory exemption could not be extended to such transactions.

Conclusion: The selling agency turnover was taxable and the levy was upheld.

Final Conclusion: The statutory exemption protected the buying agency transactions but not the selling agency transactions, so the challenge to the tax on the buying turnover failed and the challenge to the tax on the selling turnover also failed.

Ratio Decidendi: A commission agent is exempt only when the transaction is truly on behalf of a known principal and the amount retained is confined to the agreed commission or legitimate passed-through charges; any amount retained by the agent as undisclosed profit falls outside the exemption.

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