1976 (2) TMI 172 - HC - VAT and Sales Tax

Summary

Issues:
Assessability of turnover in a canteen run by three companies under a Government Order exempting canteen sales from tax.

Analysis:
The judgment of the Madras High Court dealt with the assessability of turnover in a canteen run by three companies under a Government Order exempting canteen sales from tax. The Court considered whether the turnover from the canteen sales was exempt from tax under G.O. Press No. 2238, Revenue, dated 1st September, 1964. The assessing officer and the appellate authority rejected the claim of exemption, stating that the Government Order applied only to canteens run by individual employers under a statutory obligation, not by multiple companies jointly. The Tribunal, however, held that the turnover was not liable to tax as the sales were not in the course of business of the three companies running the canteen. The revenue challenged this view in a revision petition.

The Court found that the Tribunal's view that the sales were not in the course of business of the companies and thus not liable to tax was incorrect based on a Supreme Court decision. The Court also examined the applicability of the Government Order, which required certain conditions to be met for exemption, including that the canteen must be run by an employer under a statutory obligation without profit motive. The Court noted that one of the companies was not under a statutory obligation to run a canteen, making it ineligible for the exemption. The Court clarified that the exemption under the Government Order applied to sales by the employer to the employee, not to sales by multiple employers jointly.

Ultimately, the Court held that the turnover in dispute was liable to be included in the taxable turnover, setting aside the Tribunal's order. The revenue was awarded costs, and the petitions were allowed.