TaxTMI 
TaxTMI 
2014 (6) TMI 793
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....iscrimination 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 non-profit basis as a charitable organisation without there 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. Many students of the petitioner-institution are using the boarding facilities provided by the institution and, for this purpose, the petitioner charges a lump sum 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. It is alleged that before the promulgation of the Uttarakhand Value Added Tax Act, 2005 (hereinafter referred as "the Act"), the U.P. Trade Tax Act was applicable in the State of Uttarakhand and, while the said Act was in force, the pet....
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....r contend that in view of the amended definition of "sale" pursuant to the 46th Amendment made in the Constitution, there is a deemed sale for the supply of foodstuff and, consequently, the petitioner is a dealer for supplying foodstuff to its students, even though, it could be incidental to its main activity. In the light of the aforesaid contentions of the learned counsel for the parties, the court has heard Bharat Ji Agrawal, the learned senior counsel assisted by S.K. Posti, Kanwaljit Singh, Shubham Agarwal, the learned counsel for the petitioners and Sudhir Kumar, the learned brief holder assisted by 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 Agrawal, senior advocate. 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 foodstuff is sought to be assessed as a sale under the Act. The primary object of the educational institutions is to impart education to the students and the students who are staying inside the campus canno....
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....ch 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; . . . " 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. The word "sale" has been defined under sub-clause (40) of section 2 of the Act, which is extracted hereunder: "2. (40) 'Sale' with its grammatical variation and cognate expressions means any transfer of property in goods (other than by way of mortgage, hypothecation, charge or pledge) by one person to another in the course of trade or business for cash or deferred....
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....s or purchases shall, for the purpose of this Act, be deemed to have taken place- 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- to have sold the goods at one rate and passed on the sales proceeds to 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 principal; or (iv) to have acted for a fictitious or non-existent principal;" The aforesaid provision indicates that there must be a transfer of property in goods by one person to another in the course of trade or business. "Dealer" has been defined under section 2(11) which is also extracted hereunder: "2. (11) 'Dealer' means any person who, for the purposes of or in connection with or incidental to or in the course of his business, carries on ....
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....nnected 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." 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. In the light of the aforesaid provisions, the Act would be applicable if a sale is made by a dealer or a person who carries on the business of taxable goods. The word "business" or "business activity" has been explained by various courts through several judgments. In Indian Institute of Technology, Kalyanpur, Kanpur v. State of Uttar Pradesh [1976] 38 STC 428 (All), the Indian Institute of Technology, Kalyanpur was maintaining a hostel for the scholars who would come for a brief period to the institute for the purpose of research. The food being supplied to these scholars was assessed to sales tax. The Allahabad High Co....
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..... Sai Publication Fund [2002] 126 STC 288 (SC), 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 Act. The Supreme Court held as follows (pages 294 and 295 in 126 STC): "10. The contention that the Trust in question is 'dealer' within the meaning of section 2(11) read with section 2(5A) requires careful scrutiny. As is evident from section 2(11), every person is not 'dealer' but only those persons 'who carry on the business' by buying or selling goods are regarded as 'dealers'. From the very definition of 'dealer', it follows that a person would not be a dealer in respect of the goods sold or purchased by him unless he carries on the business of buying and selling such goods. 'Dealer' and 'person' are separately defined in section 2(11) and section 2(19) of the Act respectively. 'Person' means not only natural person but includes any company or ....
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....y 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 intention to carry on 'business' connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce, etc., ordinarily incidental or ancillary activity may not come within the meaning of 'business'. To put it differently, the inclusion of incidental or ancillary activity in the definition of 'business' pre-supposes the existence of trade, commerce, etc. The definition of 'dealer' contained in section 2(11) of the Act clearly indicates that in order to hold a person to be a 'dealer', he must 'carry on business' and then only he may also be deemed to be carrying on busin....
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....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 foodstuff and that the petitioner's primary object was to impart education to the students and, therefore, was not a dealer. In Tata Main Hospital v. State of Jharkhand [2008] 36 NTN 149, the hospital was supplying medicines, surgical items, etc., to its indoor patients during the course of treatment. The taxing authorities treated the hospital as a dealer under the Bihar Finance Act on the ground that the hospital was doing business of supplying medicines, surgical items, etc. The Jharkhand High Court held that the supply of the medicines, surgical items, etc., to the patients was a part of the composite services and such composite services do not come under the definition of "business" of selling goods and the hospital could not be treated to be a "dealer" as defined under section 2(e) of the Bihar Finance Act. The High Court further held that the supply of medicines, etc., to the indoor patients does not amount to a "sale" within the meaning of section 2(t) of the Bihar Finance ....