Satish Chandra, J.@mdashThe Life Insurance Corporation of India, the Petitioner, challenges the validity of the imposition of Circumstances and Property Tax by the Zila Parishad, Meerut.
2. For the year 1967-68, the Corporation on 3-7-1967, received a notice from the Zila Parishad, Meerut, intimating that the Parishad proposed to levy Circumstances and Property Tax on it in the sum of Rs. 2,000/- on an estimated income of Rs. 96,000/-. A similar notice proposing a tax of Rs. 2,000/- on an estimated income of Rs. 96,000/- was received by the Corporation from the Zila Parishad for the year 1968-69, on 28-2-1968. The Corporation filed an objection within the prescribed time, to both the notices, ft was stated that the Divisional Office of the Corporation is situate in the town of Meerut, outside the territorial limits of the Zila Parishad. The Corporation carries on business at its Divisional headquarters. The insurance proposals are settled and the premium etc. are received at the Meerut Office. The Corporation does not transact any business in the rural areas of the district of Meerut. It was also urged that the premium charged by the Corporation depends upon mortality interest and the loading required to cover the expenses and safety margins. No profits accrue to the Corporation from the rural areas. Actuarial valuation of the Corporation''s income, expenses, assets and liabilities is done every two years at its Head Office at Bombay. Ninety-five per cent of the profits is plied back to the policyholders in the form of bonus and the rest five per cent is returned to the Central Government which is the sole owner of the entire share capital of the Corporation.
3. The assessing officer of the Zila Parishad rejected the objections. He held that the Corporation carries on business within the rural areas of the District of Meerut through agents and inspectors. He estimated that 40 per cent of the Corporation''s income accrues in the rural areas. He estimated the income at Rs. 96,000/ and on that basis, imposed the Circumstances and Property Tax of Rs. 2,000/-. The assessing officer passed two different orders in relation to the two assessment years. Aggrieved, the Corporation filed two appeals before the Commissioner, Meerut Division, Meerut. The Addl. Commissioner disposed of both the appeals by a common judgment. He held that the Corporation''s business is conducted by the agents. The Corporation is profited by this business. It is immaterial that the Corporation works through salaried employees or through agents who work on commission. Since the Corporation derives benefits from the business done by the agents, it carries on business within the rural areas of the Meerut District. On these findings, the appeals were dismissed. Aggrieved, the Corporation has approached this Court Under Article 226 of the Constitution.
4. Section 121 of the UP Kshettra Samities and Zila Parishads Adhiniym (UP Act XXXIII of 1961), 1961 empowers the Zila Parishad to impose the Circumstances and Property Tax. Under Clause (a) thereof, this tax may be imposed on any person residing or carrying on business in the rural areas, provided that such person has so resided or carried on business for a total period of at least six months in the year under assessment. It is common ground that the Corporation is not residing in the rural area. The Petitioner''s contention is that it does not carry on business in the rural area and so, the Parishad had no power to impose this tax on it.
5. The Zila Parishads Adhiniyam does not define the phrase "carrying on business". We have hence to see the significance of this phrase at common law.
6. The Corporation carries on the business of insurance throughout the country. It employs agents, who work in the field and send to the Corporation''s Divisional Offices proposals for insurance. The Corporation settles them at its Headquarters. The agents have no authority to accept or settle the proposals of insurance. The agents are paid on a commission basis according to the volume of business brought by them. The Corporation has no office within the rural area. It has no other property within that area. The question is whether the activity of the commission agents, who introduce insurance work to the Corporation, would constitute carrying on business by the Corporation in the places where the agents do their work.
7. Section 3 of the Punjab Professions, Trades, Callings and Employments Taxation Act, 1956, made every parson, who, inter alia, carries on trade within the. State of Punjab, liable to pay tax in respect of the profession, trade, calling or employment. M/s. Bajaj Electricals Ltd. had their principal place of business at Bombay and a branch office at New Delhi. It had not appointed any agent or representative to carry on business on its behalf within the State of Punjab. The Company supplied goods to the Government of Punjab and other semi-Government bodies in that State in execution of orders received at its Branch office at Delhi. The price of the goods was collected within the State of Punjab, through Banks. The Supreme Court in
8. On facts, it was held that the act of the Company in supplying goods within the State of Punjab pursuant to orders received and accepted at New Delhi and receiving price through Banks in the State of Punjab were ancillary activities and did not amount to carrying on trade within that State.
9. If a company has an office of its own at a place at which a partner or manager is in control of the business, it is settled that the company carries on business at that place (See Worcester City and County Banking Co. v. Firbank Pauling and Co. (1894) 1 QB 784 and Lysaght Ltd. v. Clark and Co. (1891) 1 QB 552.
10. But, if the company carries on its business through an agent, the question whether it carries on business at the place where the agent works, depends upon the powers and authority of the agent. In the case of Baillie v. Goodwin and Co. (1886) 33 Ch. D. 604 and Okura and Co. Ltd. v. Forsbacka Jemverks Aktiebolag (1914) I.K.B. 715 it was found that the agent had authority merely to take orders and to transmit them to the company. It was held that the company was not carrying on business at the place where the agent was working. On the other hand, in the case of La Compagnie Generale Trans-Atlantique v. Thomas Law and Co. 1899 A.C. 431 and Dunlop Pneumatic Tyre Co. v. Actien-Gessellschaft Fur Motor Und Motorfahreeng-Ban Vomm Cuddel and Co. (1902) 1 K.B. 342, it was found that the agent had power to conclude binding contracts at his own initiative, on behalf of the firm. It was held that the firm was carrying on business at the place of the agent.
11. In Murugesa Chetti v. Annamalai Chetti ILR(1899) 23 Mad 458, it was emphasised that a person carrying on business as an agent of a firm must be an agent in the strict and correct sense of the term, so as to make the firm carry on business at that place within meaning of Section 17, Code of Civil Procedure. This view was confirmed by the Privy Council in appeal in Annamalai Chetti v. Murugesa Chetti ILR (1903) 26 Mad 544.
12. The Bombay High Court in Framji Kavasji Marker v. Hormasji Kavasji Marker 1 Bom HCR 220 held that where that which is an essential ingredient in a person''s business does not take place within the local limits of the jurisdiction of a court, it cannot be said that that person has been carrying on business within the limits of that court, even though he may have an agent there for certain purposes connected with his business. Applying this test, the Travancore-Cochin High Court in Mohammad Kasim Haji Ahmad Kunju v. Sree Hanuman Industries AIR 1956 T.C. 200 held that a firm cannot be said to carry on business where it has only canvassers or agents for the purpose of obtaining offers of business and that the business of the firm will be taken to be as being carried on where the contracts relating to the business are entered into or wherefrom effective control is exercised.
13. An agent can be said to carry on the business of a firm or a corporation if he had the authority to make, himself out to the public at large that he represented the firm or the corporation in its business with the public and in the course of the business, the public did not have to come in contact with the firm or the corporation. So far as the public is concerned, the agent effected or settled the business. But, if such is not the authority or status of the agent, but he is merely a sort of Post Office conveying proposals of contracts to the firm or the company, he is a mere broker and not an agent properly so called. The work of such a broker is not the essential ingredient of the business of the firm or the company and would not make the firm or the company carry on business at the place of the broker.
14. The Life Insurance Corporation''s business is effectively done at its office where contracts of insurance are settled and premium etc. are received. The agents of the Corporation have no authority to settle contract?. They merely convey to the Corporation proposals for insurance and receive the requisite commission, if the proposal is accepted. In our opinion, the activity of the agents (whose status really is of a broker) is not the essential ingredient but is an ancillary activity of the Corporation''s business and would not mean that the Corporation was carrying on business at the place of the agents. The Zila Parishad had no power to impose the Circumstances and Property Tax on the Corporation.
15. The petitions succeeded and are allowed. The impugned assessment orders as well as orders dismissing the Petitioner''s appeal are quashed. The Petitioner would be entitled to costs from the Zila Parishad, Meerut.
