Agency entries in principal's account were not a taxable sale, but the assessee's later resale was taxable.

Contemporaneous debit entries for the exact purchase amount, made on the same day as the purchases and supported by separate commission accounting, were treated as evidence of an agency arrangement rather than a fresh sale; the entries themselves did not create a taxable event in the assessee's hands. By contrast, the assessee's later disposal of the goods as dealer constituted a sale transaction falling within the taxing provision, and the subsequent sales were taxable in his hands. The reference was therefore answered on a mixed basis: the initial debit entries were not taxable, while the later sales were taxable.

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Issues: (i) Whether the assessee's debit entries in the principals' accounts, made after purchasing goods on their instructions, gave rise to a taxable sale or taxable event in the assessee's hands. (ii) Whether the subsequent sale of the goods purchased by the assessee in and out of Madhya Pradesh according to the principals' instructions gave rise to a taxable event in the assessee's hands.

Issue (i): Whether the assessee's debit entries in the principals' accounts, made after purchasing goods on their instructions, gave rise to a taxable sale or taxable event in the assessee's hands.

Analysis: The contemporaneous debit entries, made for the exact purchase amount on the same day as the purchases, supported the inference that the assessee acted under instructions as a purchasing agent. The separate recording of commission and the absence of facts showing a fresh sale or a pakka adatiya relationship indicated that the entries in the books were not themselves a sale transaction. The circumstances were sufficient to infer authority to purchase and to treat the entries as evidence of agency rather than a new taxable sale.

Conclusion: The debit entries did not give rise to a taxable event in the assessee's hands.

Issue (ii): Whether the subsequent sale of the goods purchased by the assessee in and out of Madhya Pradesh according to the principals' instructions gave rise to a taxable event in the assessee's hands.

Analysis: The later disposal of the goods by the assessee was a sale transaction undertaken by him as dealer, and it was not disputed that the sales fell within the statutory definition attracting tax when effected by the assessee.

Conclusion: The subsequent sales did give rise to a taxable event in the assessee's hands.

Final Conclusion: The reference was answered by holding that the initial debit entries were not taxable, while the later sales were taxable, resulting in a mixed outcome on the questions referred.

Ratio Decidendi: Where contemporaneous entries and surrounding circumstances show that purchases were made on a principal's instructions through an agency relationship, the debit of the exact purchase amount in the principal's account does not by itself constitute a fresh taxable sale; however, the assessee's own subsequent sale of the goods remains a taxable event.

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