# Pohari Saran Mishra Revisionist v. Commissioner, Commercial Tax, U.P. Lucknow

- **Citation:** (2016) 7 ILRA 392
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-07-29
- **Bench:** Yashwant Varma
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/pohari-saran-mishra-revisionist-v-commissioner-commercial-tax-u-p-lucknow-44075
- **Pages:** 7

## Headnote

U.P. Trade Tax Act, 1948 - 'Turnover' - Explanation II - Cost of freight - "when separately charged" - At
the time of or before the delivery thereof - Expenses which a dealer incurs in order to complete the
transaction of sale - Obligation to transport the goods - Transfer of property in the goods - Terms and
conditions of the sale - Freight charges shown separately in an invoice or bill cannot be decisive - Freight was
rightly included in the taxable turnover of the assessee - Question raised answered against the assessee and
in favour of the revenue - Revision stands disposed of.
7 All. Pohari Saran Mishra Vs Commissioner, Commercial Tax, U.P. Lucknow 393
The short question which arises for determination in this revision is as to whether the freight charges which
are stated to have been levied and recovered by the revisionist from the purchaser of goods was liable to be
included in its taxable turnover. The answer to this question itself would turn upon the expression 'turnover'
as defined under the U.P. Trade Tax 1948
which reads as under:
"2. (i) 'Turnover' means the aggregate amount for which goods are supplied or distributed by way of sale or
are sold, by a dealer, either directly or through another, on his account or on account of others, whether for
cash or deferred payment or other valuable consideration:
Explanation I. ... Omitted...
ExplanationII. Subject to such conditions and restrictions,
if any, as may be prescribed in this behalf:
the amount for which goods are sold or purchased shallinclude the price of the packing material in which they
are packed, and any sums charged for anything done by the dealer in respect of the goods sold, at the time
of or before the delivery thereof, other than, cost of freight or delivery or cost of installation or the amount
realized as trade tax on sale or purchase of goods, when such cost or amount is separately charged;
any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of
articles returned by customers shall not be included in the turnover; and
where for accommodating a particular customer, adealer obtains goods from another dealer and immediately
disposes of the same without profit to the customer, the sales in respect of such goods shall be included in
the turnover of the latter dealer alone;(Paras 2-3)

The rival submissions have primarily centered on clause (i) to Explanation II appended to the definition and
which seeks to amplify and explain what items would stand included while determining the taxable turnover of
an assessee.(Paras 4)

According to Sri Piyush Agarwal, learned counsel for the revisionist, the charge of freight in this case was
levied separately and is therefore not liable to be included in the taxable turnover of the assessee. He lays
stress uponthe express language employed by clause (i) to the effect that the cost of freight "when separately
charged" is to be excluded from the taxable turnover.(Paras 5)

Held: (Paras 10-12)

## Text

392 INDIAN LAW REPORTS ALLAHABAD SERIES

concerned that they are based on materials brought on record is absolutely unjustified in view of
the following principles laid down in Mohammad Naim (supra): -

"It has been judicially recognized that in the matter of making disparaging remarks
against persons or authorities whose conduct comes into consideration before courts of law in cases
to be decided by them, it is relevant to consider (a) whether the party whose conduct is in question
is before the court or has an opportunity of explaining or defending himself; (b) whether there is
evidence on record bearing on that conduct justifying the remarks; and (c) whether it is necessary
for the decision of the case, as an integral part thereof, to animadvert on that conduct."

41. Consequently, in the present case it was not at all required to pass stricture and
comment upon learned Advocate General and the State functionaries as they may be acting on the
dictates of their political masters as observed by learned Single Judge and in view of this, the
strictures made in the order dated 16.03.2016 against the Advocate General and other State
Officers/Officials are quashed and will not form part of record. The other part of the order passed
by learned Single Judge be complied with forthwith.

42.With these, both the Special Appeals are partly allowed.
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REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 29.07.2016

BEFORE

THE HON'BLE YASHWANT VARMA, J.

Sales/Trade Tax Revision No.- 345 Of 2011

Pohari Saran Mishra ...Revisionist
Versus
Commissioner, Commercial Tax, U.P. Lucknow ...Respondent

Counsel for the Revisionist:
Piyush Agrawal

Counsel for the Respondent:
C.S.C.

U.P. Trade Tax Act, 1948 - 'Turnover' - Explanation II - Cost of freight - "when separately charged" - At
the time of or before the delivery thereof - Expenses which a dealer incurs in order to complete the
transaction of sale - Obligation to transport the goods - Transfer of property in the goods - Terms and
conditions of the sale - Freight charges shown separately in an invoice or bill cannot be decisive - Freight was
rightly included in the taxable turnover of the assessee - Question raised answered against the assessee and
in favour of the revenue - Revision stands disposed of.
7 All. Pohari Saran Mishra Vs Commissioner, Commercial Tax, U.P. Lucknow 393
The short question which arises for determination in this revision is as to whether the freight charges which
are stated to have been levied and recovered by the revisionist from the purchaser of goods was liable to be
included in its taxable turnover. The answer to this question itself would turn upon the expression 'turnover'
as defined under the U.P. Trade Tax 1948
which reads as under:
"2. (i) 'Turnover' means the aggregate amount for which goods are supplied or distributed by way of sale or
are sold, by a dealer, either directly or through another, on his account or on account of others, whether for
cash or deferred payment or other valuable consideration:
Explanation I. ... Omitted...
ExplanationII. Subject to such conditions and restrictions,
if any, as may be prescribed in this behalf:
the amount for which goods are sold or purchased shallinclude the price of the packing material in which they
are packed, and any sums charged for anything done by the dealer in respect of the goods sold, at the time
of or before the delivery thereof, other than, cost of freight or delivery or cost of installation or the amount
realized as trade tax on sale or purchase of goods, when such cost or amount is separately charged;
any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of
articles returned by customers shall not be included in the turnover; and
where for accommodating a particular customer, adealer obtains goods from another dealer and immediately
disposes of the same without profit to the customer, the sales in respect of such goods shall be included in
the turnover of the latter dealer alone;(Paras 2-3)

The rival submissions have primarily centered on clause (i) to Explanation II appended to the definition and
which seeks to amplify and explain what items would stand included while determining the taxable turnover of
an assessee.(Paras 4)

According to Sri Piyush Agarwal, learned counsel for the revisionist, the charge of freight in this case was
levied separately and is therefore not liable to be included in the taxable turnover of the assessee. He lays
stress uponthe express language employed by clause (i) to the effect that the cost of freight "when separately
charged" is to be excluded from the taxable turnover.(Paras 5)

Held: (Paras 10-12)

1. Ultimately for the purposes of answering the issue what must be taken into consideration is the terms and
conditions of the sale and the essential obligations attached to the bargain. The fact that freight or other like
charges are shown separately in an invoice or bill cannot be decisive of the issue whether these charges are
liable to be included in the taxable turnover or not. For the purposes of determining the issue much would
turn upon the terms of the contract as well as the intention of the contracting parties. As noted above, the
issue would have to be answered bearing in mind the essential attributes and obligations of the bargain and
the expenses which the seller is liable to incur in order to achieve and complete the transfer of property in
goods. If the above basic principles are kept in mind and are applied to the facts of the case, it becomes
apparent that freight was rightly included in the taxable turnover of the assessee.

2. In the facts of the present case the Tribunal found that in terms of clause 10 of the contract, the supply
was to be effected at the railway siding. In terms of clause 11, the responsibility and ownership of the stone
ballast remained that of the supplying contractor. In terms of clause of 12 of the contract, the measurement
of stone ballast was to be carried out and effected at the railway siding. A further condition stood imposed to
the effect that in a case of the stone ballast being found within 60 days from the date of deposit as not being
as per the quality prescribed the same would be liable to be removed by the supplying contractor. As the
Tribunal records on the basis of the terms of the contract, the contract of sale was not complete till the ballast
was transported to and measured at the railway siding. It records that the responsibility and ownership of the
394 INDIAN LAW REPORTS ALLAHABAD SERIES

ballast while in transit remained with the assessee. There was thus no transfer of property in goods at the
time of they being put into transit. The freight charges were therefore charges which clearly came to be
incurred by the revisionist in order to complete the bargain and a charge which was incurred "at the time of or
before the delivery thereof" of the goods. The cost of freight which was incurred was not a special condition
imposed by the purchaser thereof. The obligation to transport the goods was an essential element, an integral
component of the transaction of sale.

3.For the aforesaid reasons, this court answers the question raised against the assessee and in favour of the
revenue. The revision stands disposed of accordingly.

Case Law discussed:

1.India Meters Limited vs. State of Tamil Nadu, (2010) 9 SCC 423 (Para 7)

(Delivered by Hon'ble Yashwant Varma, J.)

1. Heard Sri Piyush Agrawal, learned counsel for the revisionist and the learned standing
counsel.

2. The short question which arises for determination in this revision is as to whether the
freight charges which are stated to have been levied and recovered by the revisionist from the
purchaser of goods was liable to be included in its taxable turnover.

3. The answer to this question itself would turn upon the expression 'turnover' as defined
under the U.P. Trade Tax 1948. which reads as under:

"2. (i) 'Turnover' means the aggregate amount for which goods are supplied or
distributed by way of sale or are sold, by a dealer, either directly or through another, on his account
or on account of others, whether for cash or deferred payment or other valuable consideration:

Explanation I. ... Omitted...

ExplanationII. Subject to such conditions and restrictions,

if any, as may be prescribed in this behalf:

(i) the amount for which goods are sold or purchased shallinclude the price of the
packing material in which they are packed, and any sums charged for anything done by the dealer
in respect of the goods sold, at the time of or before the delivery thereof, other than, cost of freight
or delivery or cost of installation or the amount realized as trade tax on sale or purchase of goods,
when such cost or amount is separately charged;

(ii) any cash or other discount on the price allowed in respect of any sale and any
amount refunded in respect of articles returned by customers shall not be included in the turnover;
and
7 All. Pohari Saran Mishra Vs Commissioner, Commercial Tax, U.P. Lucknow 395
(iii) where for accommodating a particular customer, adealer obtains goods from
another dealer and immediately disposes of the same without profit to the customer, the sales in
respect of such goods shall be included in the turnover of the latter dealer alone;

4. The rival submissions have primarily centered on clause (i) to Explanation II appended
to the definition and which seeks to amplify and explain what items would stand included while
determining the taxable turnover of an assessee.

5. According to Sri Piyush Agarwal, learned counsel for the revisionist, the charge of
freight in this case was levied separately and is therefore not liable to be included in the taxable
turnover of the assessee. He lays stress uponthe express language employed by clause (i) to the
effect that the cost of freight "when separately charged" is to be excluded from the taxable
turnover.

6. On the other hand, Sri B.K. Pandey, learned standing counsel has submitted that all costs
which are incurred by the dealer prior to the sale achieving completion would be liable to be
included in the taxable turnover of the assessee. He submits that the expression "when separately
charged" would not be determinative and that the terms of the sale would have to be looked into in
order to answer the issue whether freight charges are liable to be included in the taxable turnover of
the assessee.

7. Both the learned counsels to buttress their rival submissions have placed reliance upon
the judgment rendered by the Supreme Court in India Meters Limited Vs. State of Tamil Nadu [
(2010) 9 SCC 423]. Their submissions have centered around what the Supreme Court observed in
paragraphs 16, 17, 18 & 19 of the report and which for the sake of appreciation of the controversy
is extracted hereinbelow:

16. It is no doubt true that Rule 6(c) of the Rules permits deduction of the cost on
freight while determining the taxable turnover. However, that provision must be read in the context
of definition of "turnover" as also the definition of "sale" in Sections 2(r) and 2(n) respectively of
the Act.

 "Turnover" is defined in the Act, inter alia, to mean "the aggregate amount for
which goods are bought or sold or delivered or supplied or otherwise disposed of in any of the
ways referred to in clause (n)".

17. "Sale" is defined in Section 2(n), inter alia, as meaning "every transfer of the
property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one
person to another in the course of business for cash, deferred payment or other valuable
consideration". The definition goes on to include a number of other transactions also within that
definition of "sale". The turnover of an assessee/dealer would include the aggregate amount for
which goods are bought or sold. It is, therefore, the amount for which the goods are bought or sold,
396 INDIAN LAW REPORTS ALLAHABAD SERIES

which form part of the turnover, and a thing can be said to be sold only when the transaction falls
within the scope of the definition of "sale".

18. When the transfer of the property or the goods is to be atthe place of the buyer
to which the seller is under an obligation to transport the goods, the expenditure incurred by the
seller on freight in order to carry the goods from his place of manufacture to the place at which he
is required under the contract to deliver, would thus become part of the amount for which the goods
are sold by the seller to the buyer and would fall within the scope of "turnover".

19. The learned counsel for the State of Tamil Nadusubmitted that freight and
insurance charges are included in the sale price of the goods. Even if freight and insurance charges
are shown separately in the Bill and added to the price of the goods, the character of payment
would remain the same. Since freight and insurance charges represent expenditure incurred by the
dealer in making the goods available to the purchaser at the place of sale, they would constitute an
addition to the cost of the goods to the dealer and would clearly be a component of the price to the
purchaser. The amount of freight and insurance charges would be payable by the purchaser not
under any statutory or other liability but as part of the consideration for the sale of the goods and
would therefore, form part of the sale price."

8. Section 2 (i) of the 1948 Act defines 'turnover' to mean the aggregate amount for which
goods are supplied or distributed by way of sale or are sold. Explanation II while delineating the
various items which are liable to be included or excluded while computing taxable turnover in
clause (i) provides that 'turnover' would mean the amount for which goods are sold or purchased
including the price of packing material and any sums charged for anything done by the dealer in
respect of the goods sold at the time of or before the delivery thereof. While the first determinative
factor is the price, packing material and 'any sums charged' in respect of the goods, the second
factor which the explanation bids us to bear in mind is evident from the use of the expression 'at the
time of or before the delivery thereof'. The latter part then refers to the cost of freight or delivery or
cost of installation or the amount realized as trade tax on sale or purchase of goods, "when such
cost or amount is separately charged".

9. The issue, in the opinion of this Court, whether freight charges would be liable to be
included in the taxable turnover would therefore have to be answered with reference to all expenses
which a dealer does incur for effecting and completing the sale. This is evident from the use of the
phrase 'at the time of or before the delivery thereof'. This would indicate that all expenses that the
dealer incurs in order to complete the transaction of sale and before the transfer of property in the
goods takes place are liable to be included in the taxable turnover. As one reads the judgment in
India Meters Ltd (supra) it is clear that construing the provisions of the Tamil Nadu Act it was
held that the expenses incurred by the seller on freight from his place of manufacture to the place at
which he is required under the contract to deliver would be liable to be treated as falling within the
scope of the expression 'turnover'. The mere fact, the Supreme Court held, that the charges are
shown separately would not detract from the above position if it is found that there was an
obligation on the dealer to make the goods available at the place of sale.
7 All. Pohari Saran Mishra Vs Commissioner, Commercial Tax, U.P. Lucknow 397
10. The latter part of sub clause (i) which employs the words "when such cost or
amount is separately charged" is dealing with and is liable to be restricted to those class of
transactions where the obligation to transport the goods to the place of the purchaser is not
an essential facet of the transaction of sale. It must necessarily be interpreted to apply to
those cases where the transportation of the goods to the place of the purchaser is not an
essential element for the transfer of property in the goods. In fact it relates to a stage,
which is subsequent to the completion of sale. It must be interpreted to apply to charges,
which in the nature of the contract is envisaged by both parties to be an expense or charge
that is liable to be borne separately and apart from the actual price of the goods.

11. Ultimately for the purposes of answering the issue what must be taken into
consideration is the terms and conditions of the sale and the essential obligations attached
to the bargain. The fact that freight or other like charges are shown separately in an invoice
or bill cannot be decisive of the issue whether these charges are liable to be included in the
taxable turnover or not. For the purposes of determining the issue much would turn upon
the terms of the contract as well as the intention of the contracting parties. As noted above,
the issue would have to be answered bearing in mind the essential attributes and
obligations of the bargain and the expenses which the seller is liable to incur in order to
achieve and complete the transfer of property in goods. If the above basic principles are
kept in mind and are applied to the facts of the case, it becomes apparent that freight was
rightly included in the taxable turnover of the assessee.

12. In the facts of the present case the Tribunal found that in terms of clause 10 of
the contract, the supply was to be effected at the railway siding. In terms of clause 11, the
responsibility and ownership of the stone ballast remained that of the supplying contractor.
In terms of clause of 12 of the contract, the measurement of stone ballast was to be carried
out and effected at the railway siding. A further condition stood imposed to the effect that
in a case of the stone ballast being found within 60 days from the date of deposit as not
being as per the quality prescribed the same would be liable to be removed by the
supplying contractor. As the Tribunal records on the basis of the terms of the contract, the
contract of sale was not complete till the ballast was transported to and measured at the
railway siding. It records that the responsibility and ownership of the ballast while in
transit remained with the assessee. There was thus no transfer of property in goods at the
time of they being put into transit. The freight charges were therefore charges which
clearly came to be incurred by the revisionist in order to complete the bargain and a charge
which was incurred "at the time of or before the delivery thereof" of the goods. The cost of
freight which was incurred was not a special condition imposed by the purchaser thereof.
The obligation to transport the goods was an essential element, an integral component of
the transaction of sale.

13. For the aforesaid reasons, this court answers the question raised against the
assessee and in favour of the revenue. The revision stands disposed of accordingly.
----------
398 INDIAN LAW REPORTS ALLAHABAD SERIES

APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 29.07.2016

BEFORE

THE HON'BLE HARSH KUMAR, J.

Second Appeal No.- 420 Of 1998

Nathu Singh & Anr. ...Appellants
Versus
Srimati Rajvati & Ors. ...Respondents

Counsel for the Appellants:
T.S. Dabas, Jagdish Pathak.

Counsel for the Respondents:
V.K. Goel, Ajay Rajendra, P.S. Gupta.

Civil Law-Second Appeal - Cancellation of sale-deed - Person of unsound mind - Next friend - Order
XXXII Rule 15 C.P.C. - Presumption of soundness of mind - Specific plea - Admissible evidence - Nature
and extent/degree/level - Fraud - Presumption - Agreement for sale - Income tax clearance -
Registration - Mental Hospital Agra - OPD patient - Anxiety - Schizophrenia - Documentary evidence -
Oral evidence - Burden of proof - Surmises and conjectures - Manifest error of law - Perversity -
Substantial question of law - Void or voidable.

The brief facts relating to the case are that Sri Dharam Veer Singh filed Civil Suit No. 236 of 1985 in the Court
of Civil Judge Moradabad on 12.4.1985 for obtaining a decree for cancellation of sale-deed dated 17.9.1984
which is alleged to have been presented for registration in the office of Sub-Registrar on 19.10.1984 and was
registered on 21.12.1984.(Para 2)

In the suit was filed by Sri Dharm Veer Singh, through his next friend Lakhpat Singh, claiming himself
(Dharam Veer Singh) to be a person of unsound mind, the allegations of plaint in brief are that, the plaintiff
has 1/3rd share in the property plot Khasra Nos. 403, 422, 423 and 444 detailed at the foot of the plaint;
that at the time of execution of impugned sale-deed, the plaintiff was not a person of sound mind, was not
capable of understanding the contents of sale-deed and was not even able to understand as to why and on
which papers he is putting his thumb impressions; that the impugned sale-deed was obtained in hurried and
unnatural manner and was not read over or explained to the plaintiff; that the plaintiff did not receive any
sale consideration and execution of saledeed for a sum of Rs. 50,000/- is without consideration; that the land
in question was worth Rs. 1,50,000/- at the time of execution of alleged saledeed; that no permission to sell
was obtained from the District Judge; that the plaintiff had no need to sell the property, over which the
plaintiff and his family was totally dependent; that the impugned sale-deed has been obtained by playing
fraud on the plaintiff without obtaining the consent of his wife and relatives.(Para 3)

The defendants contested the suit denying the allegations made in the plaint. The defendant No. 3 Gajendra
Singh who is neither vender, nor vendee nor marginal witness to the sale deed in dispute and neither he has
any concern nor any relief has been prayed against him and has been unnecessary impleaded by plaintiff,
being son-in-law of his brother, and so has been arrayed as defendant-respondent no. 5 in the present
second appeal(Para 4)