Pre-sale freight forms part of taxable turnover; commission agency cannot be inferred from licence or invoice format alone.
Freight paid by a seller to bring coal from the colliery to its own place of business before sale is part of the cost of acquisition and forms part of taxable turnover under section 2(i) of the U.P. Trade Tax Act, 1948; merely showing freight separately in the invoice does not change that character. Commission agency cannot be inferred from possession of a B licence under the Coal Control Order or from separate billing of freight and commission alone. Agency depends on the real nature of the transaction and a proved contract of agency, so the agency issue required fresh factual determination.
Issues: (i) Whether freight incurred by the dealer for bringing coal from the colliery to its place of business formed part of taxable turnover under section 2(i) of the U.P. Trade Tax Act, 1948. (ii) Whether the dealer could be treated as a commission agent merely because it held a B licence under the Coal Control Order and separately showed freight and commission in the invoices.
Issue (i): Whether freight incurred by the dealer for bringing coal from the colliery to its place of business formed part of taxable turnover under section 2(i) of the U.P. Trade Tax Act, 1948.
Analysis: The definition of turnover covers the aggregate amount for which goods are supplied, and the exclusion for freight applies only where freight is incurred after sale for delivery to the buyer and is separately charged. Freight paid by the seller to bring goods to its own place of business before sale is part of the cost of acquisition and forms part of the turnover. Separate mention of freight in the invoice does not alter the true character of the transaction.
Conclusion: Freight incurred before sale was held to be includible in taxable turnover, against the dealer.
Issue (ii): Whether the dealer could be treated as a commission agent merely because it held a B licence under the Coal Control Order and separately showed freight and commission in the invoices.
Analysis: Agency is a matter of contract and must be established from the real nature of the transaction. A B licence under the Coal Control Order only authorises the holder to deal in coal under that regulatory regime and does not by itself prove a contract of agency with the purchaser. Separate billing of freight, value of goods, or commission is not conclusive, and the Tribunal had not recorded a finding on the existence of any agency contract. The matter therefore required fresh examination on this aspect.
Conclusion: Mere possession of a B licence and separate invoicing were held insufficient to prove commission agency, and the issue was remitted for fresh determination.
Final Conclusion: The legal position on inclusion of pre-sale freight in turnover was settled against the dealer, but the dispute was sent back for a factual determination on whether the dealer acted as a commission agent in the relevant transactions.
Ratio Decidendi: Freight incurred by a seller before the sale and for bringing goods to its own business place is part of turnover, and commission agency cannot be inferred from a licence or invoice format alone; it must rest on a proved contract of agency and the substance of the transaction.
TaxTMI 
AI Drafter ✕
TaxTMI 
