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2023 (2) TMI 4 - HC - VAT and Sales TaxExemption from tax - Taxability of Selling of food items in the school / hostel - whether the petitioner’s educational institution imparts education on non-profit motive but not on commercial basis and if so, it is exempted from tax under AP VAT Act, 2005? - HELD THAT:- The activity of a person must be a trade, commerce or manufacture so as to bring such activity as “business”. If such business is carried out for buying, selling, supplying or distribution of the goods, such person who is involved in that business shall be regarded as “dealer” and under Section 4 of A.P. VAT Act, such dealer shall be excisable to tax. In the instant case, as rightly submitted by the counsel for petitioner, the fundamental or principal activity of the petitioner’s educational institution is not that of buying, selling, supplying or distribution of the goods rather its function is to impart education that too on a non-profit motive. The petitioner in its hostel supplies food to the students but the said activity is not done in the course of business of running restaurant, eating house or a hotel. As rightly submitted by the learned counsel for the petitioner, section 2(10) (d) of the VAT Act specifically refers to only a restaurant or eating house or a hotel but the word ‘hostel’ is not specifically included therein. Therefore, the inclusion of the petitioner’s institution in the category of dealer for the purpose of AP VAT Act, 2005 and assessing the same to tax U/s 21 of AP VAT Act is not correct. The petitioner’s case was that the fee charged from the visitors of the hostel is not the actual price of the food consumed by them and the principle of charging the fee is the same as in the case of other hostels where students reside and that a fixed fee is charged for tea, breakfast, lunch and dinner and the same has no relation to the actual consumption and the charges paid by the residents have really a very remote relation to the actual value of the food stuffs consumed by them. Thus, according to petitioner, the transaction of supplying food stuffs to the residents of the hostel cannot be termed as ‘sale‘ nor can the petitioner be said to be ‘carrying on business of buying or selling goods’ within the meaning of UP Sales Tax Act. The respondent however contended that the petitioner charges price of foodstuffs supplied to the visitors separately in the bills and that the customers of the petitioner include all and sundry. In the instant case also the principal function of petitioner is to impart education with a non-commercial motive and running of the hostel is incidental to the main activity and as such, though subsidized prices are charged from the students for supply of the food items and beverages, the transaction cannot be treated as ‘sale of goods’ to bring the activity within the mischief of AP VAT Act - In the instant case the 2nd respondent has passed the impugned assessment order though the petitioner under law does not come under the purview of “dealer” as per the provisions of AP VAT Act, 2005. Therefore, the impugned order can be said to be passed wholly without jurisdiction and hence the writ petition is maintainable. Petition allowed.
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