TaxTMI 
TaxTMI 
1988 (8) TMI 395
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 1975-76 and also purchase of paddy for running the canteens. (b) Sales of motor parts as scrap. (c) Sales of human hair. The contentions advanced on behalf of the revisionist herein by the learned Government Pleader are that though the assessee-Devasthanam may not be carrying on in the main any business activity but running of canteen has no nexus nor is it incidental to the main activity and that being the business activity where food is sold for consideration to those who visit the canteen, must attract the sales tax. Likewise, for the same reasons, the motor parts which are sold as scrap and also the human hair which is collected after being removed and sold thereafter, are parts of business activities and, therefore, such sales must be exigible to tax. The said Devasthanam must be held to be a dealer which is engaged in the activity of business and so to that extent these activities must necessarily be subjected to sales tax. The counter contentions are that the Devasthanam which is governed by statutory enactment is a religious and charitable institution and the predominant activities are nothing but religious and charitable in nature and, therefore, merely becau....
X X X X Extracts X X X X
X X X X Extracts X X X X
....endowment which is in poor or needy circumstances or which required renovation; (v) establishment and maintenance of hospitals and dispensaries for the relief of the pilgrims and worshippers visiting the religious institutions; (vi) construction and maintenance of choultries and rest-houses for the use and accommodation of the pilgrim; (vii) .......................... (viii) ........................ (ix) ............................ (x) payment to the common good fund and so forth. In fact, the Sales Tax Appellate Tribunal while dealing with the aforesaid three activities has stated as under: "Thus the Devasthanam while functioning for the welfare of the pilgrims and worshippers of the temple is protecting the Hindu religion and also serves the needs of the pilgrims who visit the temples for the darshan of Sri Mallikarjuna Swamy and Bhramaramba. It is common knowledge, which can be taken judicial notice of, that the pilgrims who visit the temples of the Devasthanam pay their homage by submitting in the hundi kept in the temples their mite and such collections some times in addition to the coins and currency notes include silver, gold and other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eir hair in fulfilment of their vow and that human hair so received had to be disposed of by the Devasthanam periodically for the purpose of avoiding the problem of storage of such hair and consequential problems and also for the post of keeping the premises of the temple in clean and healthy conditions" and, thereafter, it held thus: "Judged in the light of these facts and circumstances which are not in dispute and objects for which the Devasthanam stands we proceed to determine the question whether Sri Bhramaramba Mallikarjuna Swamy Devasthanam, Srisailam, can be held to be a dealer within the meaning of section 2(1)(e) of the Act." Eventually, the finding arrived at by the Tribunal was that the assessee-Devasthanam is not a dealer in supply of food and drinks to the pilgrims as defined under the Act and such transactions cannot be transactions of sale. Dealing with the sale of motor parts as scrap, it has stated thus: "We, therefore, hold that even otherwise the transactions of the Devasthanam in selling scrap, unserviceable and surplus materials not connected with the functions and activities of the Devasthanam cannot be held as the appellants carrying on busines....
X X X X Extracts X X X X
X X X X Extracts X X X X
....defined; (iv) a commission agent, a broker, a del credre agent, and auctioneer or any other mercantile agent, by whatever name called who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal or principals." Now coming to the case law, in Hyderabad Asbestos Cement Products Ltd. v. State of A.P. [1972] 30 STC 26 (AP), wherein the assessee-company maintained a canteen for the use of its workers in compliance with the statutory provisions of the Factories Act, 1948, and the question was whether the turnover relating to the supplies of food and drink to the workers at the canteen could be charged to sales tax under the Andhra Pradesh General Sales Tax Act, it was held, that in view of the definition of "business" as amended by the Amendment Act of 1966, proof of profit-motive is unnecessary to constitute business and that the transactions of supply of food and drink to the workmen in the canteen maintained by the assessee, in pursuance of the Factories Act and the Rules, were sales and constituted business for the purposes of the Act. Further, it was held: "We do not think that it is permissible to hold that there was no 'busine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the assessee and is therefore connected with the business. What the assessee is doing is to facilitate the dealers to acquire at their cost such advertising materials of a uniform type approved by the assessee-company which, instead of allowing each of them to have these separately printed or manufactured, itself undertook to do so and supplied them to its dealers. The supply of such material is in our view being connected with the business is liable to be included in the turnover of the assessee." In Commissioner of Commercial Taxes v. Evangelical Literature Service, Madras [1974] 33 STC 325 (Mad.), the assessee-Evangelical Literature Service purchased Bibles and other Christian literature at a discount and sold them at the price marked in the books, thereby making a profit which was utilised for the propagation of the objects of the assessee and dissemination of Christian literature, and adverting to this aspect, it was held: "The aim of the respondent-assessee in buying and selling books was to make a profit and that alone was material for the purpose of assessment to sales tax and it ought not to be confused with the ultimate object of the society which was to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the nature of the functions and the purpose for which the Naval Dock Yard is established, and also because of the fact that the canteen subserves the main object and purpose of the assessee, and is an integral and inseparable part of it, it would be unrealistic to separate the said activity and treat it as a business. We must make it clear that there is a definite distinction between an activity which is ancillary or incidental to the main activity, and an activity which is an integral part of the main activity. In the first case, the incidental or ancillary activity is a distinct activity, though it is incidental or ancillary to the main activity; whereas, in the latter case, it is one single activity." In District Controller of Stores v. Assistant Commercial Taxation Officer [1976] 37 STC 423 (SC), Mathew, J., speaking for the court, in respect of the assessee-appellant, which was Northern Railway, Jodhpur, wherein the question was whether unserviceable materials, etc., sold during the period in question was liable to sales tax or not, held: "We think that the activity of the appellant in the selling of unserviceable material and scrap-iron, etc., would be 'business' withi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nevitable that a number of copies should remain surplus and that they should, therefore, be sold as waste paper." The above principle is reiterated by this Court in T.R.C. No. 70 of 1985 and batch by its judgment dated 14th June, 1988 (Andhra Prabha Private Ltd. v. State of Andhra Pradesh [1989] 73 STC 260). This Court also followed in W.P. No. 5189 of 1977 and batch dated 9th February, 1981 the ratio laid down in District Controller of Stores v. Assistant Commercial Taxation Officer [1976] 37 STC 423 (SC). Now to the case-laws cited for the assessee-Devasthanam. In Tirumala Tirupati Devasthanam v. State of Madras [1972] 29 STC 266, a single judge of the Madras High Court considered the question whether the silver and other valuable articles found in the hundis in the temples of the Tirumala Tirupati Devasthanam form an asset of the Devasthanam and when the Devasthanam converts the same into cash by holding public auctions whether the same could be said to be a business or indulging in a commercial activity and held as under: "It follows from this definition that in order to characterise a person as a dealer, the primary prerequisite is that he should carry on business. Such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oing business. Their objects are not only enumerated by the Legislature of the Andhra Pradesh State, but their accredited objects are more salutary and more important to the community and to the country than mere commercial activity as thought of by the respondent. In this view, the action of the respondent is absolutely illegal and without jurisdiction." In Deputy Commissioner (C.T.) v. South India Textile Research Association [1978] 41 STC 197 (Mad.), the question was where an organisation established solely and exclusively for the purpose of carrying on research, purchases certain products, which are incidental to the said research, and then sells away the resultant product, whether such sales constitute trade or commerce and adverting to this aspect it was held as under: "However, where an organisation is constituted solely and exclusively for the purpose of carrying on research, the purchase of products by the said organisation for the purpose of carrying on its research and the sale of the resulting products by the said organisation cannot be said to be in the nature of trade or commerce so as to bring it within the definition of the term 'business' contained in section....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the petitioner cannot be dubbed as a 'dealer' within the meaning of section 2(c) of the U.P. Sales Tax Act. The Sales Tax Officer had accordingly no jurisdiction to initiate proceedings for levy of sales tax on the petitioner." In Commissioner of Sales Tax v. Cutchi Dasha Oswal Mahajan Graha Udyog Committee [1975] 36 STC 1 (Bom), a public charitable trust was established with the main object of ameliorating the living conditions of poor and destitute women of a particular community. In order to provide maintenance for the poor and distressed women of the community, who had no source of income, the institution employed them for preparing eatables, which were sold like any other articles in the market and not at a concessional rate or at cost price. The surplus resulting from the sales was utilised for extending its activities so that more destitute women of the community could get relief. So the question was whether the said trust was a "dealer" and it was held: "The profits have resulted to the respondent in the course of carrying out an activity in direct furtherance of the main purpose of the trust. In these circumstances, the sale transactions, which resulted in these pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld be deduced are: (a) If the main activity of a juristic person is business or commercial in nature, and in case the subsidiary activity which may not form the integral part of the main but nevertheless, such activity, different in nature, has the indicia of business or commerce, then that activity by itself would constitute a distinct business within the meaning of section 2(bbb) of the Act and would attract sales tax. (b) If the dominant activity of an institution, like religious or charitable institution, is not of business activity, but if the secondary activity has the elements of commerce or trading activity, then in order to claim exemption from tax, it must be established that it forms the integral part of the main activity. (c) However, if any religious or charitable institution has any distinct incidental activity which is in the nature of business or commerce and if there is no functional integrality with the main activity, then such business activity will be exigible to tax. Now, bearing in mind the above principles, when we come to the incidental activity of the assessee-Devasthanam, viz., running of the canteen wherein eatables are sold to the pilgrims, i....