Supply of food to students by educational institution not taxable under Uttarakhand VAT Act

The court held that the petitioner institution's supply of foodstuff to students did not amount to a business under the Uttarakhand Value Added Tax Act, 2005. The institution's primary activity of imparting education was not commercial, and the incidental supply of food was integral to the educational process. As a result, the petitioner was not considered a dealer and was not liable to pay tax under the Act. The court quashed the tax assessment notices, allowed the writ petitions, and ordered each party to bear its own costs.

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Issues Involved:
1. Whether the supply of foodstuff to students by the petitioner institution amounts to a business.
2. Whether the petitioner institution qualifies as a dealer under the Uttarakhand Value Added Tax Act, 2005.
3. Whether the petitioner is liable to pay tax under the Uttarakhand Value Added Tax Act, 2005.

Detailed Analysis:

Issue 1: Whether the supply of foodstuff to students by the petitioner institution amounts to a business.

The petitioner is an educational institution managed by a registered society, primarily engaged in imparting education from Kindergarten to Class XII. The institution provides boarding facilities and charges a lump sum amount for tuition and boarding fees, without separately charging for food. The mess is run by the institution itself, not by a catering contractor. The primary activity of the petitioner is to impart education, and the supply of food is incidental to this main activity. The court referred to several precedents, including the Indian Institute of Technology, Kalyanpur v. The State of Uttar Pradesh, where it was held that the principal activity was academic, and the supply of food was incidental and integral to the academic activity, thus not amounting to a business.

Issue 2: Whether the petitioner institution qualifies as a dealer under the Uttarakhand Value Added Tax Act, 2005.

The term 'dealer' under Section 2(11) of the Act refers to any person who carries on the business of buying, selling, supplying, or distributing goods. The court determined that the petitioner's primary objective is educational, not commercial. The court cited the Supreme Court's decision in Commissioner Of Sales Tax v. Sai Publication Fund, which held that if the main activity is not business, incidental transactions do not amount to business unless there is an independent intention to carry on business. The court concluded that the petitioner's activity of supplying food to students does not qualify as carrying on business, and thus, the petitioner is not a dealer under the Act.

Issue 3: Whether the petitioner is liable to pay tax under the Uttarakhand Value Added Tax Act, 2005.

Section 3 of the Act stipulates that tax is levied on sales made by a dealer carrying on the business of taxable goods. The court emphasized that the petitioner's main activity of imparting education is not a commercial activity or business. The incidental activity of supplying food does not transform the institution into a business entity. The court referred to the Andhra Pradesh High Court's decision in Gowtham Residential Junior College v. Commercial Tax Officer, which held that the supply of food to students did not amount to a sale because the primary objective was educational, not commercial. Consequently, the petitioner is not liable to pay tax under the Act as they are not engaged in the business of selling taxable goods.

Conclusion:

The court held that the issuance of the notice proposing to assess tax on the supply of foodstuff to residential students was without jurisdiction. The petitioner's primary activity is educational, and the incidental supply of food does not amount to a business. Therefore, the petitioner is not a dealer and is not liable to be taxed under the Uttarakhand Value Added Tax Act, 2005. The notices issued were quashed, and the writ petitions were allowed. Each party was ordered to bear its own costs.

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