Co-operative society supplies to members can be taxable sales, and profit motive is not essential for business character.

A registered co-operative society is a body corporate capable of holding property and contracting, so supplies of goods to its members for consideration amount to sales because property in the goods passes from the society to the member. The society is therefore a distinct legal entity and can fall within the statutory definition of dealer when it carries on systematic supply of goods. Absence of a profit motive does not exclude the activity from business for sales tax purposes, as a commercial profit object is not essential where goods are supplied for a price. On that reasoning, supplies to members were held liable to sales tax.

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Issues: Whether supplies of goods by a registered co-operative society to its members constitute sales under the Orissa Sales Tax Act, 1947; whether such a society is a distinct legal entity and a dealer within the meaning of the Act; and whether absence of profit motive excludes the activity from being business for sales tax purposes.

Issue (i): Whether supplies of goods by a registered co-operative society to its members constitute sales under the Orissa Sales Tax Act, 1947.

Analysis: A sale under the Act requires transfer of property in goods for consideration. A co-operative society registered under the governing co-operative societies law is a body corporate with power to hold property and enter into contracts. The property in the goods supplied vests in the society, and when goods are supplied to members for a price, there is transfer of the general property in the goods from the society to the member. The relationship is not that of joint owners merely releasing an interest to another joint owner.

Conclusion: Yes. Supplies made by the society to its members amount to sales.

Issue (ii): Whether such a society is a distinct legal entity and a dealer within the meaning of the Act.

Analysis: The statutory scheme treats a registered co-operative society as a body corporate. The State Legislature was competent to enact the provision conferring such status on co-operative societies. Once the society is a separate legal person capable of holding property and contracting, it answers the statutory definition of a dealer where it carries on the business of selling or supplying goods to its members. The legislative definition could validly include societies dealing with their members.

Conclusion: Yes. The society is a distinct legal entity and falls within the definition of dealer.

Issue (iii): Whether absence of profit motive excludes the activity from being business for sales tax purposes.

Analysis: For the purpose of the sales tax law, profit motive is not essential if the activity is in the nature of trade or concern supplying goods for a price. A scheme for systematic supply of goods to members for consideration may amount to business even if no profit is actually sought or made. The absence of a commercial profit object does not prevent the society from being a taxable dealer.

Conclusion: No. Absence of profit motive does not take the activity outside business.

Final Conclusion: The society was liable to sales tax on supplies made to its members, and the challenge to the assessment failed.

Ratio Decidendi: A registered co-operative society that is a body corporate and supplies goods to its members for consideration effects a taxable sale, and such activity may constitute business even without a profit motive.

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