TMI Blog1967 (11) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants. -------------------------------------------------- The judgment of the Court was delivered by SHAH, J., -The Enfield India Ltd. Co-operative Canteen Ltd., respondent herein, was registered as a Co-operative Society under the Madras Co- operative Societies Act (6 of 1932). The object of the Society was to provide a canteen for the employees of Enfield India Ltd. The Society was assessed by the Deputy Commercial Tax Officer to pay sales tax for the years 1959-60 and 1960-61 on its turnover from refreshments supplied to its members. The respondent-Society then moved in the High Court of Judicature at Madras three petitions under Article 226 of the Constitution for orders quashing the proceedings of the Deputy Commercial Tax Officer, Saidapet, assessing the Society to sales tax in respect of its transactions. Srinivasan, J., following a decision of the Madras High Court in Young Men's Indian Association (Regd.), Madras, and Another v. Joint Commercial Tax Officer, Harbour Division II, Madras and Another [1963] 14 S.T.C. 1030., quashed the orders of assessment. In appeal to the High Court, the orders passed by Srinivasan, J., were confirmed. With special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation' held that the Explanation to section 2(g) and Explanation (1) to section 2(n) of the Act were ultra vires the State Legislature, because they "created a fiction by which the concept of the word 'sale' was extended to include a transaction which properly speaking would not amount to sale". The Court held that within the meaning of the Act an incorporated members' club distributing refreshments to its members was not a "dealer", and supply of food by it to its members for a price was not a "sale", since the members of a club registered as a company or a society merely utilise the services of the club for their needs and the members divide amongst them- selves the total expenses. Essentially, in the view of the Court, the matter is not different from the case of a number of persons in a family purchasing jointly an article and later sharing the same among themselves. In such a case, it was said, there is no element of transfer of property from one to another, and the fact that the club helps its members in arranging to run a common mess will not make it the owner of the articles supplied to the members, for it is at best an agent or mandatory whose services are utilised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever unable to hold that the transactions of the respondent- Society of supplying refreshment to its members for a price paid or promised were not taxable under the Madras General Sales Tax Act, 1959. By the definition in section 2(g) a "dealer" is a person who carries on the business of buying, selling, supplying or distributing goods, whether for cash, or for deferred payment, or for other valuable consideration. The expression "business " is defined in section 2(d) as meaning any trade, commerce or manufacture, whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern. A scheme for supply- ing goods to its members by a society for price may partake of the activity of the nature of adventure or concern in the nature of trade, even if the activity is not actuated by a profit-motive. The respondent-Society which has according to its object of incorporation made arrangements for the supply and distribution of refreshments to its members without a profit- motive may be regarded as carrying on trade and would on that account fall within the definition of a "dealer" within the meaning of section 2(g). A co-operative society registered under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members only and claims to make no profit, it cannot be inferred that in preparing refreshments, and making them avail- able to its members it is acting as an agent of the members. Nor can it be said that the Society is holding its property including refreshments prepared by it for supply to its members as a trustee for its members. A registered Society is a body corporate with power to hold property and is capable of entering into contracts. It cannot be assumed that property which it holds is property of which its members are owners. The property in law is the property of the Society. The members are undoubtedly entitled to compel the Society to act according to its constitution and to apply the property for the purposes for which it is held, but on that account the property of the Society cannot be treated as the property of the members. The Society is a person: the property in the refreshments which it supplies to its members is vested in the Society and when refreshments are supplied for a price paid or promised transfer of property in the refreshments results. In the case of an unincorporated Society, club or a firm or an association ordinarily the supply and distribution by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its members at a fixed percentage above its cost, supplied liquor to a member, and he was prosecuted for selling by retail intoxicating liquor without a licence. It was held that there was no sale by retail, for the member was as much a co-owner of the liquor supplied as any other member of the club. Any member of the club was entitled to obtain liquor on payment of the price and since there was no bargain, nor any contract with the manager in respect of the liquor supplied, and the member to whom the liquor was supplied was acting upon his rights as a member of the club, not by reason of any new contract, but under his old contract of association by which he subscribed a sum to the funds of the club, and on that account he became entitled to have liquor supplied to him as a member at a certain price. In Metford v. Edwards [1915] 1 K.B. 172., a working men's club was registered under the Friendly Societies Act, 1896. It was held that liquor kept on the premises of the club by the members who are owners of the liquor and intended for consumption by the members, is distributed to the members by one of them in return for payment, is not sold by retail within the meaning of the Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the members of the club." The Courts in these cases were dealing with case of quasi-criminal nature, and the substance of the transaction rather than the legal form in which it may be clothed had to be determined. It was held that if in substance the property in the liquor held by the club-whether incorporated or unincorporated-was vested in the members, when a member received and paid for it, there was no sale within the meaning of the Licensing Act, but was a transfer of a special property in the goods from all the other members of the club to the consumer in consideration of the price paid. We are not dealing in this case with liability criminal or quasi- criminal. The question is one of liability under a taxing statute and the Court in determining the liability of the Society to pay tax cannot ignore the form and look at what is called the "substance of the transaction". Ex facie, the transaction is one in which the legal owner of property transfers it to another pursuant to a contract for a price, and that transaction must be regarded as a sale. Whether by appropriate provisions in the Articles of Association or Rules, a scheme may be devised under which the goods supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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