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TMI Blog2011 (7) TMI 1353X X X X Extracts X X X X X X X X Extracts X X X X ..... the memorandum of Association of the Society, the aims of the institution is to provide education without discrimination on the basis of race, caste or religion. One of the aims is to impart education to boys and girls through Hindi and English medium and to develop the students into all-round personalities with the help of different activities. The society is managing the institution on a nonprofit basis as a charitable organisation without their being any profit motive involved and, in this regard, the society is also registered under Section 12A of the Income Tax Act as a charitable organization. 4. Many students of the petitioner institution are using the boarding facilities provided by the institution and, for this purpose, the petitioner charges a lumpsum amount towards tuition fee and boarding fee. The petitioner is not charging any separate amount or cost for food supplied to the students, who are using the hostel facility. It has been stated that the mess is being run by the institution itself and is not being done by a catering contractor. 5. It is alleged that before the promulgation of the Uttarakhand Value Added Tax Act, 2005 (hereinafter referred as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts also admit that a lumpsum fee is charged and no separate bill is raised by the institution for the cost of food supplied to its students. The respondents however contend that in view of the amended definition of sale pursuant to the 46 Amendment made in the Constitution, there is a deemed sale for the supply of food stuff and, consequently, the petitioner is a dealer for supplying food stuff to its students, even though, it could be incidental to its main activity. 9. In the light of the aforesaid contentions of the learned counsel for the parties, the court has heard Mr. Bharat Ji Agarwal, the learned senior counsel assisted by Mr. S.K Posti, Mr. Kanwaljit Singh, Mr. Shubham Agarwal, the learned counsel for the petitioners and Mr. Sudhir Kumar, the learned Brief Holder assisted by Mr. R.C Arya, the learned Brief Holder for the respondents. The learned counsel for the petitioners in the connected writ petitions have adopted the arguments of Mr. Bharat Ji Agarwal, Senior Advocate. 10. The controversy involved lies in a short compass. The petitioners are educational institutions and are providing boarding and lodging facilities to the students. The supply of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1956; or under this Act; or (f) sales or purchases of taxable goods if such dealer is already registered under the Uttaranchal (the Uttar Pradesh Trade Tax Act, 1948) Adaptation and Modification Order, 2002 or the Central Sales Tax Act, 1956; and desires to retain such registration after the commencement of this Act or applies for grant of registration voluntarily under the provisions of this Act; and (i) if such dealer has been carrying on the business in the immediately preceding assessment year and continues it on the date of commencement of this Act, he shall be liable to pay tax from the date of commencement of this Act; and (ii) if such dealer commences business on or after the date of commencement of this Act, he shall be liable to pay tax from the date on which any of events from (a) to (f) above takes place for the first time in any assessment year; . 13. From the aforesaid provision, it is clear that there has to be a sale of taxable goods. It is to be made by a dealer or a person and this dealer or person must carry on the business of taxable goods. 14. The word sale has been defined under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace in the State under sub-clause (b) if the goods are in the State at the time of transfer of property in such goods (whether as goods or in some other form) involved in the execution of works contract, notwithstanding that the agreement for works contract has been wholly or in part entered into outside the State; Explanation 3 : Notwithstanding any thing contained in this Act, two independent sales or purchases shall, for the purpose of this Act, be deemed to have taken place- (a) when the goods are transferred from a principal to his selling agent and from the selling agent to his purchaser; (b) when the goods are transferred from the seller to a buying agent and from the buying agent to principal, and if the agent is found in either of the cases aforesaid- (i) to have sold the goods at one rate and passed on the sales proceeds of his principal at another rate, or (ii) to have purchased the goods at one rate and passed them to his principal at another rate, or (iii) not to have accounted to his principal for the entire collection or deductions made to him, from the sales or purchases effected by him on behalf of his principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, commerce, manufacture, adventure or concern, or (e) the execution of any works contract or the transfer of the right to use any goods for any purpose (whether or not for a specified period), and (f) Any transaction of buying, selling or supplying plant, machinery, raw materials, processing material, packing material, empties, consumable stores, waste or byproducts, or any other goods of a similar nature or any unserviceable or obsolete or discarded machinery or any parts or accessories thereof or any waste or scrap or any of them or any other transaction whatsoever which is ancillary to or is connected with or is incidental to, or results from such trade, commerce, manufacture, adventure or concern or works contract or lease but does not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods; 20. The aforesaid definition indicates that business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, or any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of Section 2(j) of the Industrial Disputes Act. It held that the main scheme was imparting education and subsidiary and incidental work would not make it the character of an industry. 25. The distinction laid down in the aforesaid decisions is that where the principal activity of an institution is predominantly academic or charitable, an activity which may have some incident of business which is minor, subsidiary and incidental to the principal activity and is an integral part of it could not be held that the institution would become a dealer doing a business in the supply and sale of food stuff. 26. In Commissioner Of Sales Tax v. Sai Publication Fund. 2002 (126) S.T.C 288 (S.C), the devotees of Saibaba of Shridi were printing pamphlets containing messages of Sai Baba and the pamphlets were being made available to the devotees on a nominal charge. The Supreme Court held that the trust was neither a dealer nor was it doing any activity which could be termed as a business activity under the definition of the word business as defined under the Bombay Sales Tax. The Supreme Court held as follows:- 10. The contention that the Trust in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch even without profit motive and it is in a way a means to achieve the object of the Trust through which message of Saibaba is spread. It is clear from the Trust Deed and objects contained therein that it was not established with an intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the Trust carries on the business of selling and supplying goods so as to fall within the meaning of dealer under Section 2(11) of the Act. 11. No doubt, the definition of business given in Section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would not normally amount to business unless an independent intention to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive (Board of Revenue v. A.M Ansari 1976 (3) SCC 512). Such profit motive may, however, be statutorily excluded from the definition of business but still the person may be carrying on business . and further held :- 28. In our view, if the main activity was not business , then the connected, incidental or ancillary activities of sales would not normally amount to business . 30. In Gowtham Residential Junior College v. Commercial Tax Officer, Benz Circle, Vijaywada 2009 (19) V.S.T 305 (A.P), the Andhra Pradesh High Court held that the supply of food to the students residing in the hostel did not amount to a sale since the petitioner was not carrying on the business of sale and purchase of food stuff and that the petitioner's primary object was to impart education to the students and, therefore, was not a dealer. 31. In Tata Main Hospital v. the State of Jharkhand 2008 NTN (Vol. 36) 149, the hospital was supplying medicines, surgical items etc. to its indoor patients during the course of treatment. The taxing authorities treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be treated as a commerce or a business. The incidental activity of supplying food stuff would not come within the meaning of the word business as defined under Section 2(6) of the Act. Consequently, since no business is being carried out and there is no sale, the petitioner would not come within the meaning of the word dealer as defined under the Act. 34. The contention of the respondents that the dominant intention is not required to be seen in view of the amended definition of the word sale pursuant to the 46 Amendment in the Constitution and that the sale of food stuff would be a sale as contemplated under Section 2(40)(f) of the Act is based upon a decision in Bharat Sanchar Nigam Ltd. v. Union of India2006 (3) SCC 1, in which the Supreme Court in para 49 held that after the 46 Amendment, the sale element of those contracts which are covered by sub-clause (6) of Clause 29-A of Article 366 are separable and subjected to sales tax and that there was no question of the dominant nature test to be applied. There is no quarrel with the aforesaid proposition. The judgment is however not applicable to the case at hand. Before imposing any tax, one has to see whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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