2014 (5) TMI 497 - HC - VAT and Sales Tax

Liability of Sales Tax - Auction sale of the gold bullion offered by the devotees to the assessee/ Devasthanam - Religious institution Held that - Relying upon Sri La Sri Subramanya Desiga Gnanasambada Pandarasannadhi v. State of Madras, 1983 (7) TMI 11 - MADRAS High Court There is no doubt that the activity of the assessee is religious in nature - The conduct of sale of the offerings is incidental to the object which is totally religious - That has also been the finding given by the authorities below - It is very clear that to treat a person as a dealer u/s 2(g), the activity he carries on must be in the course of the business - The term business defined u/s 2(d) also makes it very clear that it relates to the trade and commerce and any transaction incidental thereto - Therefore, by a bare application of the definition of the above said terms which are the basis for the purpose of imposing tax under the Act There is no hesitation to hold that there is absolutely no business or trading activity by the assessee/Devasthanam. Relying upon Tirumala Tirupati Devasthanam, Tirupati v. The State of Madras and another 1971 (8) TMI 192 - MADRAS HIGH COURT - Which was referred with approval impliedly by the Apex Court in Commissioner of Sales Tax v. Sai Publication Fund 2002 (3) TMI 45 - SUPREME Court wherein the Apex Court elaborately has discussed about the various terms including business, dealer, etc., and held that to term a person as a dealer there must be a profit motive - The Revenue neither contended nor proved that in sale of publications the Trust had an independent intention to do business as incidental or as an ancillary activity. Relying upon Commissioner of Sales Tax v. Sai Publication Fund 2002 (3) TMI 45 - SUPREME Court - It may be stated that the question of profit motive or no-profit motive would be relevant only where a person carries on trade, commerce, manufacture or adventure in the nature of trade, commerce etc. - In the present case irrespective of the profit motive, it could not be said that the Trust either was dealer or was carrying on trade, commerce etc. - The Trust is not carrying on trade, commerce etc., in the sense of occupation to be a dealer However, added here that whether a particular person is a dealer and whether he carries on business, are the matters to be decided on facts and in the circumstances of each case - The reasoning as given by Tribunal in the impugned order is unsustainable - Accordingly, this revision stands allowed and the impugned order of the Tribunal stands set aside and the order of the Appellate Assistant Commissioner stands restored - Decided in favour of the assessee.

Summary

Issues Involved:
1. Whether the Appellate Tribunal erred in reversing the order of the Appellate Assistant Commissioner.
2. Whether the Appellate Tribunal was correct in applying the Karnataka Pawn Brokers Association v. State of Karnataka case.
3. Whether the Appellate Tribunal erred in not recognizing the appellant as a religious institution.

Issue-wise Detailed Analysis:

1. Reversal of the Appellate Assistant Commissioner's Order:
The High Court examined whether the Appellate Tribunal erred in reversing the Appellate Assistant Commissioner's decision, which had set aside the assessment order on the turnover of Rs. 11,88,150/- from the sale of gold bullion offered by devotees. The Appellate Assistant Commissioner had relied on the judgment in Arulmigu Dhandayuthapani Swami Thirukkoil v. Commercial Tax Officer-II, Palani, which found that the dominant activity of the assessee was religious and charitable, not business. The High Court agreed with this perspective, emphasizing that the sale of offerings was incidental to the religious and charitable objectives of the Devasthanam, and thus, did not constitute a business activity.

2. Application of Karnataka Pawn Brokers Association v. State of Karnataka:
The Tribunal had applied the Karnataka Pawn Brokers Association v. State of Karnataka case, which held that the activity of pawn brokers selling pledged goods by auction should be treated as a business. The High Court found this analogy inappropriate for the present case, noting that the pawn brokers' activities were inherently commercial, whereas the Devasthanam's activities were religious. The High Court highlighted that the sale of offerings by the Devasthanam was incidental to its religious purpose and not a business transaction.

3. Recognition of the Appellant as a Religious Institution:
The High Court reviewed the scheme framed by the Civil Court for the Devasthanam, which was settled by the Supreme Court in Sri La Sri Subramanya Desiga Gnanasambada Pandarasannadhi v. State of Madras. The scheme's object was the maintenance of the temple and related religious activities. The High Court emphasized that the sale of offerings was incidental to these religious activities. The court referred to Section 2(g) of the Tamil Nadu General Sales Tax Act, which defines a "dealer" as one who carries on business activities. The High Court concluded that the Devasthanam's activities did not fit this definition, as they were not conducted with a profit motive or as part of a business.

Additional Judgments and Legal Precedents:
The High Court referenced several judgments to support its decision:
- Tirumala Tirupati Devasthanam, Tirupati v. The State of Madras: This case held that the sale of metallic objects from hundials by a Devasthanam was not a business activity.
- Commissioner of Sales Tax v. Sai Publication Fund: The Supreme Court held that incidental activities without a profit motive do not constitute business.
- Federal Bank Ltd. and others v. State of Kerala and others: The High Court found this case inapplicable as it involved a bank's commercial activities.
- State of Tamil Nadu v. Parle Products (P) Ltd.: The High Court distinguished this case, noting that the sale of calendars by a biscuit manufacturer was part of its business, unlike the Devasthanam's incidental sale of offerings.

Conclusion:
The High Court concluded that the Tribunal's reliance on commercial cases was misplaced and that the Devasthanam's activities were religious and not business. The revision was allowed, the Tribunal's order was set aside, and the Appellate Assistant Commissioner's order was restored. The questions of law were answered in favor of the assessee, recognizing the Devasthanam as a religious institution not liable for sales tax on the incidental sale of offerings.