Head Office and Branch Office of a Concern are not Two Separate Entities: HC Quashes Assessment under U.P. Trade Tax Act

While quashing an assessment under the Uttar Pradesh Trade Tax Act, 1948, the Allahabad High Court held that the head office and the branch office of a concern cannot be deemed as separate entities.

In fact, “a Head Office or a Branch Office are only arms of the one singular entity which is the concern. A Branch Office does not of its own have a separate and distinct legal existence,” said Justice Yaswant Verma while hearing a sales tax revision case filed by the assessee, M/ S Gaurav AgroChem Industries Agwanpur Moradabad.

The Assessee in the instant case, is a proprietorship concern having its Head Office in the State Jammu & Kashmir and a Branch Office at Moradabad. The Branch Office was engaged in the purchase of mentha oil from either registered dealers or directly from farmers situate within this State for and on behalf of the concern. For the relevant assessment years the Assessing Authority took the view that both the head office and the branch office are two separate entities and purchases made by the Branch Office were concluded purchases effected within the State of U.P. which are exigible to tax under the U.P. Trade Tax Act, 1948.

On appeal, the Appellate Tribunal confirmed the order.

Relying on the Apex Court decision in English Electric Company, the Court observed that a Branch Office does not of its own have a separate and distinct legal existence.

The Court further observed that both the Assessing Authority as well as the Tribunal has proceeded on the premise that the Branch Office was a separate entity which effected a purchase within the State of U.P. and which resulted in the occurrence of a concluded transaction.

Refusing to upheld the findings of the Tribunal, the Court noted that the purchases made within the State of U.P. were transactions entered into by the concern through its agency which was the Branch Office. “The consignment of the goods by the Branch to the Head Office of the concern in the State of Jammu and Kashmir again was not to a separate or distinct entity. Both offices, as has been held by the Supreme Court, were agencies or arms of a common concern. The Tribunal in this sense appears to have committed an even greater mistake in seeking out a contract between the Branch Office and the Head Office. For reasons noted above, this line of enquiry was clearly and principally misplaced.”

The bench further added that both the authorities had lost sight of the unambiguous and undisputed declaration made by the revisionist that all purchases which were being effected within the State of U.P. were exclusively for being transmitted outside the State where its Head Office was situate. According to the bench, there was an unbroken and inextricable link between the purchases made in the State of U.P. and their consequential dispatch to the State of Jammu & Kashmir.

It was therefore, clearly a purchase in the course of interstate trade and commerce referable to Section 3(a) of the 1956 Act, the Court said.

To Read the full text of the Order CLICK HERE