INTERPRETATION OF COMMERCIAL CONCERN

[Dr. Sanjiv Agarwal]

There is always a dispute as to who is included in person and what is meant by commercial concern? Is individual a commercial concern or whether sole proprietor firms will be regarded as commercial concerns?

Meaning of ‘Commercial’

In Webster’s Third New International Dictionary, the term ‘Commercial’ means ‘or, in or relating to commerce’. ‘Commercial’ in ordinary paralance, means ‘engaged in commerce’ and ‘commercialise’.

In Black’s Law Dictionary, “commercial” has been defined as “relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce”. In R.M. INVESTMENT & TRADING CO. PVT. LTD. VERSUS BOEING CO. - 1994 (2) TMI 301 - SUPREME COURT, while dealing with the expression “commercial” it has been opined that the expression “commercial” should be construed broadly having regard to the manifold activities which are integral part of international trade today. In Stroud’s judicial dictionary (5th Edition), the term ‘commercial’ is defined as traffic, trade or merchandize in buying and selling of goods.

The word ‘Commercial’ is defined in the Concise Oxford Dictionary, new reprint 1990, p 227, as having profit’ as a primary aim rather than artistic etc value. [DENA BANK VERSUS PRAKASH BIRBHAN KATARIA AND ORS. - 1993 (4) TMI 338 - BOMBAY HIGH COURT].

In P. Ramanatha Aiyars’s Advanced Law Lexicon (3rd edition), the word, ‘Commercial Purpose’ is defined as: Word has a vide connotation, in determining commercial purpose, scale of business, the investment involved, motive and intention behind the business, whether in the nature of earning a livelihood or earning substantial profits, currently as well as in future should be taken in to consideration.

It means “to engage in conduct, practice, or make use of for profit-seeking purposes as distinguished from participation, practice, or use for spiritual or recreational purposes or for other non pecuniary satisfactions”. [Social S G of Assissi Sisters v. K S EB (1988)1 Ker LT 727(733)].

Meaning of Commercial Concern

In case of commercial concern, all persons are not covered. Only concerns are covered, who are engaged in commerce or commercial activity. A commercial concern should be a business enterprise or organisation having profit motive. Black’s Law Dictionary defines ‘commercial’ as to relate to or is connected with trade and traffic or commerce in general, is occupied with business and commerce. Oxford Dictionary defines it as engaged in, or connected with commerce or having profit as a primary aim rather than artistic value. Concern has been defined to mean ‘a business, a firm’ which certainly does not mean all persons. Any natural person in his or her own individual capacity can not be termed as a commercial concern but a sole proprietorship firm will definitely be called a commercial concern. Only individuals will be included in persons. Even a hindu undivided family or association of persons or body of individual will be covered under concern.

The difference between commercial concern and person is apparent. All concerns may not be commercial concerns for which engaging in business, trade or commerce is essential. That is why government or charitable organisations are held not to be commercial concerns.

The term ‘commercial concern’ denotes a firm or a business entity or organisation, engaged in commercial activities like sale, purchase or providing services for consideration and having profit motive. A charitable institution cannot fall under the category of a ‘commercial concern’, because it does not have profit motive. The term ‘commercial concern’, in the context of service tax means the concern engaged in providing business auxiliary services. Individuals as natural person cannot be termed as commercial concern unless such persons are engaged as commercial concerns and have an establishment.

Criteria for being a commercial concern

To ascertain whether a concern is carrying out commercial or business activities or not, following tests may be run —

• whether the activity runs the risk of profit or loss.
• whether the activity is in the nature of earning a living for the person who does it.
• whether the activity is aimed at making substantial profits.
• whether the activity is intended to serve the interest of the general public.
• the motive and intention behind carrying on the activity.
• whether the profit/surplus (after adjusting the expenditure against any receipts) is reinvested for the purpose of achieving the objectives and is not distributed to any member of the organisation, other than for specific services provided in his/her individual capacity.

P. Ramanatha Aiyar’s Advanced Law Lexicon explains the interpretation of word ‘commercial concern’ in following terms:

"Commercial concern" means a public limited company or a  co-operative society or a firm or any other person or body of persons engaged in trade or commerce, and includes-

1. a concern engaged in banking or insurance;
2. a financial corporation;
3. a concern engaged in shipping and navigation;
4. a concern engaged in the business of brokers dealing  in shares; stocks and securities and commodities;
5. a concern engaged in the business advertising  consultants;
6. a light railway;
7. a concern engaged in road transport service;
8. a concern engaged in air transport service;
9. a rubber, tea, coffee or chincona plantation;
10. a concern engaged in the business of forwarding all clearing agents;
11. any other concern which, in the opinion of the Central Government, is a commercial concern and is declared to be such by that Government by notification in the Official Gazette, but does not include in industrial concern. [Collector of statistics Act (32 of 1953), S. 2(b)].