Agency versus dealer status in cotton purchases: commission, reimbursement, and advances did not make the intermediary the owner of turnover.

A person who purchased raw cotton for mills, arranged ginning and pressing, and forwarded the goods after advancing funds and charging commission was treated as an agent, not as a dealer acting on his own behalf. The court noted that the mills had authorised the purchases, the sellers recorded the transactions in the mills' name, and reimbursement with interest did not change the character of the arrangement. On that basis, the disputed turnover was not taxable in the assessee's hands, and the reference was answered in his favour.

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Issues: Whether the assessee, who purchased raw cotton on behalf of mills, arranged ginning and pressing, and forwarded the goods after advancing funds and charging commission, was acting as a dealer on his own behalf or merely as an agent of the mills, and whether the turnover in question was taxable in his hands.

Analysis: The arrangement showed that the mills had directed the purchases to be made on their behalf and had authorised the assessee to deal with the cotton seeds and to arrange ginning, pressing, and despatch. The sellers had sold the raw cotton in the name of the mills, and the mills' name appeared in the sellers' account books. The mere fact that the assessee advanced his own money for purchases, received reimbursement with interest, and earned commission did not convert him into a purchaser in his own right. At the highest, he remained an agent with a financial interest in the transactions. The letters relied upon by the department only showed that written authority was sought for administrative convenience and did not support the inference that the purchases were made on the assessee's own behalf.

Conclusion: The assessee was held to be merely an agent of the mills and not a dealer in respect of the disputed turnover; the questions referred were answered in the negative in favour of the assessee.

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