TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 386
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....rnataka Appellate Tribunal, they are heard together and are being disposed of by this common order. Though the appeals are listed for admission, with the consent of learned counsel for both parties, they were heard for final disposal. 2.1 The parties are referred to herein according to the rank in which they appear in STRP No. 36 of 2025. 2.2 As can be found from the pleadings, the respondent is an educational university, an autonomous body, engaged in imparting education primarily to students in rural areas, including those who have discontinued their studies. The respondent also offers distance education to enable such students to complete their education. Being engaged solely in educational activities, without any commercial or business intentions, the respondent is not required to be registered under the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as "KVAT Act"), and accordingly, has not filed any monthly returns in VAT Form-100. The petitioner-State, having observed that the respondent is engaged in the sale of various printed materials in addition to its educational activities and services, conducted a re-assessment for the period 2006-07 to 2012-13. ....
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....39; and therefore liable to tax under the KVAT Act, 2003. 3) Whether or not the Petitioner University could be considered as a 'dealer' and 'carrying on business' as defined under Sections 2(12) and 2(6) of the KVAT Act, 2003 in regard to sale of Prospectus to students, merely for the reason that the price charged for sale of Prospectus is higher than the cost of printing. 4) Whether or not the Hon'ble Appellate Tribunal is correct in holding that the Petitioner University is liable interest u/s 36(1) of the KVAT Act, 2003 for non-payment of tax, when it is not a 'dealer' and carrying on business and therefore outside purview of the Act. 5) Whether or not the provisions of the KVAT Act, 2003 are applicable to the petitioner University established by Statute with the sole object of imparting education to students and more so when sale of Prospectus to students is an integral part of its sole object of imparting education. 6) Whether or not the impugned Order dated 2-2-2024 passed by the Hon'ble Appellate Tribunal is otherwise in accordance with law. 6. Sri Aditya Vikram Bhat, learned Additional Government Advocate, a....
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....ity, and other associated services. The price charged for the prospectus contains no element of profit. Learned counsel submits that the University is not a dealer, is not engaged in any business, and is therefore not required to be registered as a dealer or to file returns under the KVAT Act. It is further submitted that the respondent-University has no profit motive and has not derived any profit. The contention of the State that the printing and sale of prospectus resulted in profit to the University is without any basis. The printing and sale of prospectus is not a continuous activity but occurs only at the beginning of the academic session. Moreover, the State has not taken into account other charges included in the cost of the prospectus, such as application processing, eligibility evaluation, registration, and admission of students, among others. 7.4 Learned counsel further submits that the sale of prospectus is an integral part of the University's educational objectives, carried out without any business nexus or profit motive. It is submitted that, in connection with the activity of printing and sale of prospectus, the University has not earned any profit. Learned counse....
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....irement of registration under the KVAT Act and compliance with its other provisions. For the purpose of examining this issue, the following provisions are relevant and are extracted hereunder for convenience: 11.1 Sections 2(6), 2(12), 2(34), 2(35), 2(36), and Section 4 of the KVAT Act, for ready reference, are extracted as follows: (6) 'Business' includes:- (a) any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on in furtherance of gain or profit and whether or not any gain or profit accrues therefrom; and (b) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. (12) 'Dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration, and includes- (a) an industrial, commercial or trading undertaking of the Government, the Central Government, a State Government....
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....ther valuable consideration shall be deemed to be a dealer for the purposes of this Act. (3) In respect of the transfer of the right to use feature films, the person who transfers such right to the exhibitor and from whom the exhibitor derives the right to make such use shall be deemed to be the dealer under this clause. (4) (a) An agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally or a person who is exclusively engaged in poultry farming and sells the products of such poultry farm shall not be deemed to be a dealer within the meaning of this clause; (b) Where the agriculturist is a company and is selling pepper, cardamom, rubber, timber, wood, raw cashew or coffee grown on land cultivated by it personally, directly or otherwise, such company, shall be deemed to be a dealer in respect of turnovers relating to sales of such produce. (34) 'Taxable turnover' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed, but shall not include the turnover of purchase or sale in the course of int....
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....n and one half per cent.]." 12. Section 4 of the KVAT Act imposes a liability to pay tax on the taxable turnover of every dealer who is, or is required to be, registered. Section 4 is, therefore, attracted only in respect of a registered dealer or a dealer required to be registered. The term "dealer," as defined in Section 2(12), means any person who carries on the business of buying, selling, supplying, or distributing goods, directly or indirectly, whether for cash, deferred payment, commission, remuneration, or any other valuable consideration. 13. Section 2(6) of the KVAT Act defines "business" to include any trade, commerce, manufacture, or any adventure or concern of a similar nature, whether or not such trade, commerce, manufacture, adventure, or concern is carried on in furtherance of gain or profit, and whether or not any gain or profit accrues therefrom, as well as any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure, or concern. 14. The moot question that arises for consideration is whether the respondent-University is engaged in "business" and whether the printing and sale of prospectus can be regarded ....
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....factual situation is distinguishable. The printing and sale of prospectus is purely incidental to the imparting of education and is not carried out with any intention to conduct business profit. It cannot be held that the respondent-University, which was established with the primary object of imparting education to school dropouts, is engaged in business with a commercial intention. In the absence of complete accounts, the price at which the prospectus are sold cannot, by itself, be determinative of whether the activities of the respondent-University constitute business or a commercial activity. 18. It is relevant to extract the pertinent paragraphs from Manipal University (supra), which are as follows: 12. Section 2(12) defines 'dealer', which means any person who carries on the business of buying, selling and supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and it includes several other categories as mentioned in this provision. Section 2(34), defines 'taxable turnover' to mean that the turnover on which a dealer shall be liable to pay tax as determined aft....
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....hat the word "business" is wider than the words "trade, commerce or manufacture, etc.". The word "business" though extensively used is a word of indefinite import, in taxing statutes, it is normally used in the sense of an occupation, a profession which occupies time, attention and labour of a person, normally with a profit-motive and there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive and not for sport or pleasure, (State of Andhra Pradesh v. H. Abdul Bakshi and Bros. [1964] 15 STC 644 (SC); AIR 1965 SC 531). Even if such profit motive is statutorily excluded from the definition of "business" yet the person could be doing "business". 14. The word "carrying on business" requires something more than merely selling or buying, etc. Whether a person "carries on business" in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive. [Board of Revenue v. A.M. Ansari [1976] 38 STC 577 (SC); (1976) 3 SCC 512]. Such profit-motive may, however, be statutorily ex....
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....n that case (Sai Publication Fund [2002] 126 STC 288 (SC)); [2002] 258 ITR 70 (SC)), the object of the assessee-trust was to spread message of Sai Baba of Shirdi and it was not in dispute that the books and the literature containing message of Sai Baba were distributed by the trust to the devotees of the trust "at cost price". In view of the facts before the Supreme Court, it was observed that it cannot be said that the trust carried on the business of selling and supplying goods so as to fall within the meaning of dealer under Section 2(11) of the Bombay Sales Tax Act. 19. The Supreme court in A.M. Ansari [1976] 38 STC 577 (SC); (1976) 3 SCC 512 also had an occasion to deal with the very same words/phrases. The observations made by the Supreme Court in the said report are relevant for our purpose which read thus (page 585 in 38 STC): "...whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive. The court further went on to observe that when a subsidiary product is....
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....st of the prospectus, concluded the existence of a profit motive and the commercial nature of the activity. No contrary material has been placed on record to disprove the University's contention that the cost of the prospectus includes charges for other services, namely printing, processing of applications, evaluation of eligibility, registration, and admission of students. 21. The finding of the Assessing Authority, the First Appellate Authority, as well as the Tribunal, that the sale of prospectus attracts tax under the KVAT Act, is without any basis and is founded on mere presumption. Both the Tribunal and the First Appellate Authority committed an error in holding, based on Manipal University (supra), that the sale of prospectus is taxable under the KVAT Act, without a proper examination of the principles laid down by this Court in that judgment. 22. The reliance placed on the judgment of the Delhi High Court in Amway India Enterprises Private Ltd. (supra), to contend that a person claiming exemption must establish that the products squarely fall within the category of exempted goods, is not applicable to the facts of the present case. The Coordinate Bench of this Court i....