Commercial character test for business activity excludes an employee fair price shop from dealer liability under sales tax law.

Turnover from a fair price shop was not treated as business turnover because the activity lacked a commercial character. Although the statutory definition of "business" under the Madras General Sales Tax Act, 1959 covered trade, commerce and incidental transactions, the court noted that the activity still had to be in the course of trade or commerce. The shop was run as an employee amenity, and the articles of association did not show that it was carried on as a trade or commercial venture. Mere accrual of profit was insufficient, so the assessee was not a dealer in respect of that turnover and the turnover was not liable to sales tax.

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Issues: Whether the turnover arising from the assessee's fair price shop constituted business activity so as to make the assessee a dealer liable to sales tax under the Act.

Analysis: The definition of "business" in Section 2 of the Madras General Sales Tax Act, 1959, as amended, included trade, commerce, manufacture, and transactions connected with, incidental to, or ancillary to such activity. Even so, the activity had to bear a commercial character and be in the course of trade or commerce. The fair price shop was run to provide commodities to employees as an amenity, and there was nothing in the articles of association to show that the assessee carried on that activity as a trade or commercial venture. Mere accrual of profit was held to be insufficient.

Conclusion: The assessee was not carrying on business in the fair price shop in a commercial sense and was not a dealer in respect of that turnover; the turnover was not liable to tax.

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