ZILA PARISHAD KHERI Vs. HINDUSTAN SUGAR MILLS

JUDGEMENT

(1.) These are connected appeals from a judgment of the Allahabad High Court. Civil Appeals Nos. 1893-1894/68 are by special leave and Civil Appeal No. 172/69 is by certificate. The point which has to be decide is common to all of them.

(2.) It is necessary to refer to the facts in Civil Appeal No. 1893/68 only. The Hindustan Sugar Mills Ltd. is a company manufacturing sugar. Its factory is situate in Cola Gokaran Nath in District Kheri in the State of U. P. For manufacturing sugar the company purchases sugarcane in the District of Kheri. It maintains some staff and also makes certain advances to cultivators within the rural area of the said District. It was assessed to what is known as the circumstances and property tax. The relevant provision under which this tax could be levied was Sec. 114 of the District Boards Act 1922 which was repealed by the U. P. Kshettra Samitis and Zilla Parishads Adhiniyam, 1961, hereinafter referred to as the "Adhiniyam" but a similar provision, Section 121 was enacted in that statute. The material portion of Section 121 is as follows:-

(3.) The short question which the High Court was called upon to decide and which has to be determined by us is whether on the admitted and undisputed facts any tax could be levied under Section 121 of the Adhiniyam on the company whose factory for manufacturing sugar was situate outside the jurisdiction of the Zilla Parishad. On behalf of the Zilla Parishad it was maintained that the company was purchasing sugarcane in the rural area within its jurisdiction for the purpose of manufacturing sugar in its factory and since the purchases were made within the rural area it was "carrying on business" in that area and was thus liable to the levy and payment of tax. All that has to be decided, therefore, is whether the company was carrying on business in the rural area within the jurisdiction of the Zilla Parishad when the activity attributed to it consisted of regularly buying or purchasing sugarcane for the business of manufacturing sugar in its factory which was outside the rural area. It was not disputed before the learned single Judge that the business of the company consisted of manufacturing sugar. For that purpose it was essential to purchase the raw material at the mill gate and in the mofussil area including the rural area in the District of Kheri. The reasoning of the learned Judge was that in the same business it may be necessary for the company to purchase some machinery or spare parts from different places in the country or to purchase fuel wood and lubricating oil from different places. It could hardly be said that the business of manufacturing sugar was being conducted or carried on at all those places from where these commodities or Articles were purchased. Merely because the purchase of sugarcane was essential for the carrying on of business of manufacturing sugar it did not mean that any business was being carried on in the places where the sugarcane was being purchased. The Division Bench distinguished the cases which had been relied upon on behalf of the Zilla Parishad arising under the Income-tax, 1922. It was pointed out that the question had to be looked at from the standpoint of a businessman. If a person manufactured sugar in the District of Kheri but collected sugarcane which was a raw material from half a dozen Districts it could hardly be said from the point of view of business, that it was being carried on in the various Districts from where the raw material was being acquired.