2001 (12) TMI 837 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of Section 2(n)(v) of the Tamil Nadu General Sales Tax Act.
2. Applicability of the law declared by the Supreme Court in Joint Commercial Tax Officer vs. Young Men's Indian Association.
3. Impact of the Constitution 46th Amendment Act, 1982 on the definition of 'sale.'
4. Status of the petitioner as an incorporated or unincorporated body.
5. Taxability of transactions between an association and its members.
6. Alleged discriminatory treatment by the State Government.
7. Principle of no taxation by intendment.

Issue-Wise Detailed Analysis:

1. Constitutionality of Section 2(n)(v):
The petitioner initially challenged the constitutionality of Section 2(n)(v) of the Tamil Nadu General Sales Tax Act, which levies tax on the supply of goods by an unincorporated association to its members for valuable consideration. However, the petitioner later accepted the constitutionality of this provision.

2. Applicability of Supreme Court Law:
The petitioner argued that the law declared by the Supreme Court in Joint Commercial Tax Officer vs. Young Men's Indian Association (1970) 26 STC 241, which held that the supply of goods by a club to its members did not constitute a sale, should apply. However, this argument was countered by the subsequent amendment to Article 366 of the Constitution, which expanded the definition of 'sale.'

3. Impact of Constitution 46th Amendment Act, 1982:
The 46th Amendment to Article 366 introduced Clause 29-A, which expanded the definition of 'sale' to include the supply of goods by any unincorporated association to its members for valuable consideration. This amendment altered the previous legal position by deeming such supplies as sales, thus making them taxable.

4. Status of the Petitioner:
The petitioner claimed to be an incorporated body, which would exempt it from the definition of 'unincorporated association' under Clause 29-A(e). However, the court found that the petitioner, registered under the Tamil Nadu Societies Registration Act, 1975, did not qualify as an incorporated body. The court referenced the Supreme Court's decision in Board of Trustees of Ayurvedic and Unani Tibbia College vs. State of Delhi, which held that societies registered under the Societies Registration Act, 1860, are not incorporated bodies.

5. Taxability of Transactions:
Even if the petitioner were considered an incorporated body, the court held that sales by incorporated bodies to their members are taxable. The court noted that the law has always treated sales by incorporated entities to their members as taxable, and the 46th Amendment did not change this position.

6. Alleged Discriminatory Treatment:
The petitioner argued that the State had treated a similar arrangement by the Tamil Nadu Leather Development Corporation Limited as non-taxable. The court found that this was an error by the State, and the State was initiating action to recover the tax. The court cited Supreme Court rulings that an erroneous benefit extended to one party does not entitle another to the same benefit.

7. Principle of No Taxation by Intendment:
The court acknowledged the principle that no tax can be imposed by inference or analogy. However, it found that Section 2(n)(v) of the Tamil Nadu General Sales Tax Act explicitly provided for the levy of tax on the supply of goods by unincorporated associations to their members, in conformity with Article 366 Clause 29-A(e).

Conclusion:
The court dismissed the writ petition, upholding the taxability of the transactions between the petitioner and its members under Section 2(n)(v) of the Tamil Nadu General Sales Tax Act. The court found no justification for interfering with the Tribunal's order.

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