TMI Blog1968 (8) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1959?" We may point out that in question No. (1), the reference to "30th January, 1961" in the period 1st July, 1960 to 30th June, 1961, is obviously a mistake and the correct period which should be deemed to have been mentioned in question No. (1) is 1st July, 1960 to 30th June, 1961. In the second line of the first question referred to us, the words "in respect of" after the word "case " and before the word "sales" are not to be found; but we have added those words as on reading those words, the question may be properly understood. The opponent, who is the assessee-society, is a co-operative credit society formed by the employees of Anil Starch Products Ltd., which is a public limited company. The assessee-society was formed with the object of acting as broker for the purpose of making collective purchases of household and other articles required by the members and managing hotel and cheap grain shop for the benefit of the members. The assesseesociety took over the management of the canteen run in the premises of the Anil Starch Products Ltd. for the benefit of the members. The Sales Tax Officer assessed the society and levied sales tax and general tax on the sales effecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of buying or selling goods in the State, and includes a State Government which carries on such business, and also any society, club or other association of persons which buys goods from, or sells goods to, its members." Explanation to section 2(11) is not relevant for the purposes of this judgment. Section 2(28) of the Act defines "sale" as follows: "(28) 'Sale' means a sale of goods made within the State, for cash or deferred payment or other valuable consideration, and includes any supply by a society or club or an association to its members on payment of a price or of fees or subscription, but does not include a mortgage, hypothecation, charge or pledge; and the words 'sell', 'buy' and 'purchase', with all their grammatical variations and cognate expressions, shall be construed accordingly." Explanation to section 2(28) is not relevant for the purposes of this judgment. Section 2(19) of the Act defines a "person" by an inclusive definition and is as follows: "(19) 'Person' includes any company or association or body of individuals, whether incorporated or not, and also a Hindu undivided family, a firm and a local authority." It is common ground before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms of the section cannot be enlarged by mere construction so as to include within the operation of the term "terminal tax", goods which are in transit and are being transported across the jurisdictional limits of the municipality. In Kalidas Dhanjibhai v. The State of Bombay A.I.R. 1955 S.C. 62., the Supreme Court interpreted the meaning of the word "shop" in section 2(27) of the Bombay Shops and Establishments Act, 1948; and the question was whether "such trade or business" occurring in that definition related to the earlier part of the definition. The "shop" in that particular statute was defined as follows: "'Shop' means any premises where goods are sold, either by retail or wholesale or where services are rendered to customers, and includes an office, a store room, godown, warehouse or work place, whether in the same premises or otherwise mainly used in connection with such trade or business but does not include a factory, a commercial establishment, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment." It was contended that the word "such" occurring in the phrase "such trade or business" related to the opening wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depart from the general system of law, without expressing its intention with irresistible clearness........" This passage from Maxwell was approved by their Lordships of the Privy Council in Murugiah v. Jainudeen[1954] 3 W.L.R. 682 at p. 687., and their Lordships agreed that the law was correctly stated in the passage just cited. To the same effect are also the observations of the Court of Appeal in England in National Assistance Board v. Wilkinson[1952] 2 Q.B. 648., where it was held that the statute is not to be taken as effecting a fundamental alteration in the general law unless it uses words pointing unmistakably to that conclusion. Lord Goddard, C.J., observed in that case: "But it may be presumed that the Legislature does not intend to make a substantial alteration in the law beyond what it expressly declares. In Minet v. Leman[1855] 20 Beav. 269. , Romilly, M.R., stated as a principle of construction which could not be disputed that 'the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched.'" T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efreshments 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 such a society, club, firm or an association of goods belonging to it to its members may not result in sale of the goods which are jointly held for the benefit of the members by the society, club, firm or the association, when by virtue of the relinquishment of the common rights of the members the property stands transferred to a member in payment of a price, and the transaction may not prima facie be regarded as a 'sale' within the meaning of the Act. By providing that a transfer of property in goods from a corporate body to its members for a price, the Legislature does not overstep the limits of its authority, and it cannot on that account be held that the first Explanation to section 2(n) is in its entirety ultra vires the State Legislature. * * * There is nothing on the record of the case which shows that the society is acting merely as an agent of its members in providing facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied for a price. We are not called upon in this case to decide whether an unincorporated club supplying goods for a price to its members may be regarded as selling goods to its members." Thus so far as the question of an incorporated society supplying the goods to its members is concerned, the above decision of the Supreme Court clearly establishes that such supply of goods by the incorporated society to its members would amount to a sale and when the Legislature provides that such supply amounts to a sale, the Legislature does not overstep the limits of its authority; and it cannot be held that such provision in the legislation is entirely ultra vires the State Legislature. The above decision of the Supreme Court has to be borne in mind while interpreting the meaning of the word "sale" occurring in the sales tax legislation, because in its earlier decision in The State of Madras v. Gannon Dunkerley Co. (Madras) Ltd.(1), the Supreme Court had pointed out that the expression "sale of goods" in entry 48 in List II of Schedule VII of the Government of India Act, 1935, cannot be construed in its popular sense but must be interpreted in its legal sense and should be given the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has been held in three different decisions of the Supreme Court that in connection with the sales tax legislation the word "business" must be ordinarily interpreted as an activity carried on with a profit-motive. In The State of Andhra Pradesh v. H. Abdul Bakshi and Bros. [1964] 15 S.T.C. 644., the Supreme Court interpreted the expression "business" occurring in the Hyderabad General Sales Tax Act, 1950. There the Supreme Court pointed out that the expression "business", though extensively used is a word of indefinite import; in taxing statutes it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person normally with the object of making profit. To regard an activity as business there must be a course of dealing either actually continued or contemplated to be continued with a profit-motive, and not for sport or pleasure. But to be a dealer under the Hyderabad General Sales Tax Act, 1950, a person need not follow the activity of buying, selling and supplying the same commodity. Mere buying for personal consumption, i.e., without a profitmotive, will not make a person dealer within the meaning of the Act, but a person who cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions; in others it would have to be inferred from a review of the circumstances attendant upon the transaction." In that particular case, the Supreme Court applied the test of a casual trading activity as distinguished from a regular trading activity and held that when a subsidiary product turned up regularly and continuously and was being sold from time to time, intention to carry on business in such a product may be reasonably attributed to the assessee. It was also held that a person who sells goods which are unserviceable to his business does not become a dealer in those goods, unless he has an intention to carry on business in selling those goods. The same meaning of the word "business" so far as a taxing statute was concerned was again held to be the meaning in Director of Supplies and Disposals, Calcutta v. Board of Revenue[1967] 20 S.T.C. 398. There Sikri and Ramaswami, JJ., cited the decisions in H. Abdul Bakshi Bros.'s case[1964] 15 S.T.C. 644. and Raipur Mfg. Co.'s case[1967] 19 S.T.C. 1.; and it was held by Sikri and Ramaswami, JJ., (Shah, J., dissenting) that the Director of Supplies and Disposals was not carrying on the business of buying or selling go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s done as a business, that is, with a profit-making motive, the club cannot be a dealer under the Act. At page 452 of the report, the definition of the word "dealer" occurring in section 2(c) of the C.P. and Berar Sales Tax Act has been set out as follows: " 'Dealer' means any person who, whether as principal or agent, carries on in Madhya Pradesh the business of selling or supplying goods, whether for commission, remuneration or otherwise and includes a firm, a partnership, a Hindu undivided family and the Central or a State Government or any of their departments and includes also a society, club or association selling or supplying goods to its members." At page 453 of the report, Vyas, J., delivering the judgment of the Division Bench observed: "A society, club, or association is referred to in the concluding portion of the definition of 'dealer' and the concluding portion of the definition says that the term 'dealer' includes also 'a society, club or association selling or supplying goods to its members'. The well settled rule of construction requires that the two parts of the definition must be harmonized. The words 'selling or supplying goods' occur in the earlier part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Government or any of their departments and also included a society or a club or association selling or supplying goods to its members. Therefore, this definition under section 2(c) of the C.P. and Berar Sales Tax Act clearly indicated that so far as a firm, a partnership, a Hindu undivided family and the Central or State Governments were concerned, each of those entities would be a "dealer" only if that entity carried on the business of selling or supplying goods. Thus, the words "selling or supplying goods" occurring in that statute were so much associated with the business of selling or supplying goods so far as the rest of the entities occurring in section 2(c) of the C.P. and Berar Sales Tax Act were concerned that the same words "selling or supplying goods" occurring in the context of society, club or association were held by the Division Bench to take colour from the earlier portion of the definition; and it was held by the Division Bench that the principle of harmonious construction must be applied and "selling or supplying goods" when used in the context with a society, or a club or an association also indicated that the society, club or association must be carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressions used in the first portion of the definition of "dealer" and the expression used in the third portion of the said definition are entirely different. In the first portion the words are "buying or selling goods". In the last portion the words are "buys goods from or sells goods to". The two expressions occurring in the first and the third portions of the definition being different, there is no question of the words "buys goods from or sells goods to" occurring in the last portion of the definition deriving colour from the first portion of the definition. In my opinion, therefore, the decision of the Division Bench in Gondwana Club's case[1958] 9 S.T.C. 450., can be clearly distinguished because of the definition of the word "dealer" before us and that decision is not binding on us so far as the definition of the word "dealer" in section 2(11) of the Act is concerned. It was contended on behalf of the assessee-society in this connection that the Legislature does not intend to make any substantial alteration either in express terms or by clear implications, beyond the minimum scope and object of the statute referred to by Bhagwati, J., in M.K. Ranganathan's caseA.I.R. 1955 S.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of business, i.e., the business activity carried on with profit-motive, there was no necessity to provide for such society, club or other association of persons in the last portion of the definition of the word "dealer". That takes me to the meaning to be attributed to the word "includes". It is true that in the definition of the word "dealer" immediately before the words "any society, club or association of persons" only the words "and also" are used and the word "includes" is not used expressly in connection with society, club or other association of persons; but it is common ground before us that in the context of the definition of the word "dealer" the word "includes" which precedes "Central Government or any State Government" would also govern the last portion dealing with any society, club or other association of persons. There are several authorities regarding the scope of the word "includes" occurring in the definition clauses of statutes. The leading case on the subject is the decision of the Privy Council in Dilworth and Others v. The Commissioner of Stamps[1899] A.C. 99. At page 105 of the report Lord Watson delivering the judgment of their Lordships of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land or Wales' can be sufficiently accounted for by regarding them as having been inserted by the draftsman ex super abundanti cautela to make sure that no one could suggest that this clause did not extend to the purchase of freehold property as an investment. I think it is pressing the argument altogether too far to say that the effect of inserting those words must be to introduce some process which is not investing at all. If one looks at the grammar of the clause, one finds that 'including' refers back to 'in any manner'. So one gets 'moneys... ............may be invested............in any manner............including' a particular manner. That seems to me to lead to the conclusion that what is said in clause 8 is that the manners or modes of investment authorized are to include investment in the purchase of freehold property. Therefore, it seems to me that this clause, on its true construction, only authorizes the purchase of freehold property as an investment." In B.P. Krishnamurthy v. State of Mysore[1962] 13 S.T.C. 436. , the Mysore High Court after citing the observations of Lord Watson in Dilworth's case[1899] A.C. 99. observed: "Ordinarily, the word 'including' as contrast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "includes any supply by a society or club or an association to its members". What was supplied by a society or an association to its members was included within the definition of the word "sale"; and the expressions "sell ", "buy" and "Purchase", with all their grammatical variations and cognate expressions have got to be construed with reference to the word "sale". It is, therefore, clear to me that the words "any society, club or other association of persons which buys goods from, or sells goods to, its members" occurring in the third portion of the definition of the word "dealer" have not been included by way of abundant caution but have been enacted in the third portion of the definition of the word "dealer" in order to bring within its category certain entities which would not otherwise have been included within the definition of the word "dealer " since they are not persons carrying on the business of buying or selling goods with a profit-motive. In my opinion, the word "includes" so far as it is applicable to any society or club or other association of persons occurring in the third portion of the definition is concerned, it enlarges the class of persons which would be falli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale" makes it clear that any supply by a society, club or an association to its members on payment of a price or of fee or subscription is a sale; and it is a sale of that category which is referred to in the last portion of the definition of the word "dealer" in section 2(11) of the Act, viz., "buys goods from, or sells goods to, its members". Any society, club or other association of persons which buys goods from or sells goods to its members as defined in the definition of the word "sale" in section 2(28) of the Act, would automatically come within the third portion of the definition and, therefore, it was not necessary for the Legislature to mention "whether or not in the course of business" when laying down the third portion of the definition. In my opinion, the absence of the words "whether or not in the course of business" in the third portion of the definition makes no difference to the interpretation of the word "dealer". In coming to my conclusions, I have borne in mind that the Legislature should not be presumed to have done anything in vain and that all the words occurring in a statute should be given their proper meaning and the Legislature should not be attributed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been registered at all under section 22. It is in this exceptional case that section 22(5-A) comes into play and, in my opinion, since these conditions which are analysed above, apply to the assessee-society, even if I were wrong in my conclusion regarding question No. (1) the assessee-society would still be liable to pay tax under section 22(5-A); and even if I were wrong in my conclusion regarding question No. (1), I would answer question No. (2) in the affirmative. In my opinion, the questions referred to us should be answered as follows: Q. No. Answers (1) In the affirmative. (2) Does not arise in view of my answer to question No. (1). If necessary, in the affirmative. The assessee-society should pay the costs of this reference to the State of Gujarat. P.C.-In view of the difference of opinion on the points which clearly emerge from our respective judgments, the case should now be placed under clause 36 of the Letters Patent of this High Court before one or more of the other judges and the points should be got decided as laid down in that clause. MEHTA, J. (August 12, 1968)-With great respect to my learned brother, I beg to differ on the first question referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent. on its working capital employed in running the canteen........" Under rule 74(3) also where the canteen is managed by a co-operative society registered under the Bombay Co-operative Societies Act, 1925, the occupier shall provide the initial equipment for such canteen and shall undertake that any equipment required thereafter for the maintenance of such canteen shall be provided by such co-operative society. On interpretation of these provisions, the Tribunal has come to a finding that the factory canteen in the present case was run on a non-profit basis and what was permitted to the society under the proviso to rule 78(2) was only a remuneration, but it did not lead to any inference of profit-motive on the part of the society. The Sales Tax Officer assessed the society and levied sales tax and general tax on the sales of these articles by the canteen during the four periods from 16th February, 1960 to 30th June, 1963. In the four appeals the Assistant Commissioner of Sales Tax held that the canteen catered to the outside parties, over and above the employees and members of the staff and, therefore, its activities were such as would bring it within the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of the term 'dealer' contained in clause(11) of section 2 of the Bombay Sales Tax Act, 1959? (2) If the answer to question No. (1) is in the negative, whether on the facts and in the circumstances of the case the opponent-society would still be liable to pay tax during the period it holds registration certificate by virtue of sub-section (5-A) of section 22 of the Bombay Sales Tax Act, 1959?" The main controversy in the present case as to whether the society running this canteen without any profit-motive, is a dealer or not will have to be resolved by resorting to two definitions in the Act, namely, section 2(28), which defines a sale, and the definition of a "dealer" in section 2(11) of the Act. Section 2(28) defines a "sale" to mean a sale of goods made within the State, for cash or deferred payment or other valuable consideration, and includes any supply by a society or club or an association to its members on payment of a price or of fees or subscription...............and the words "sell", "buy" and "purchase", with all their grammatical variations and cognate expressions, shall be construed accordingly. Section 2(11) defines a "dealer" to mean any person who whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdships observed as under: "The expression 'business' though extensively used is a word of indefinite import. In taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business 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. But to be a dealer a person need not follow the activity of buying, selling or supplying the same commodity. Mere buying for personal consumption, i.e., without a profit-motive, will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer. The Legislature has not made sale of the very article bought by a person a condition for treating him as a dealer; the definition merely requires that the buying of the commodity mentioned in rule 5(2) must be in the course of business, i.e., must be for sale or use with a view to make Profit out of the integrated activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be material to find out whether the person carried on a business. But even after the application of all these tests, the further ingredient, which must exist in all cases, is whether these transactions of sale were ordinarily entered into only with a profit-motive in the sense explained by their Lordships. In the last decision in this connection in Director of Supplies Disposals v. Board of Revenue[1967] 20 S.T.C. 398., both in the minority judgment by Shah, J., and in the majority judgment delivered by Ramaswami, J., on behalf of himself and Sikri, J., the same tests have been approved. At page 401 Shah, J., in terms observed that by merely realising the value of a capital asset, the owner did not become a dealer. Where, however, he set up an organisation -a substantial and systematic course of activity-to sell the goods with a profit-motive, he might in the light of circumstances be deemed to have entered into an activity in the nature of business or trade. At page 405 Ramaswami, J., in the majority decision also reiterated the observations in the State of Andhra Pradesh v. Abdul Bakshi Bros.[1964] 15 S.T.C. 644." to the effect that in taxing statutes, the term "business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for supplying 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 was not actuated by profit-motive. The society was, therefore, held to be a "dealer" within the meaning of section 2(g) of that Act because the Legislature had expressly departed from the traditional concept of business and had given such a wide meaning to the term "business" to cover activities actuated by profit-motive or not. That decision could have no application to the facts of the present case where we have no such wide definition of "business" in our Act. "Business" has to be construed in its traditional sense, as ordinarily used in all such taxing statutes, viz., it must be an organised and systematic activity carried on with the set purpose of making profit. In the aforesaid decision in Enfield India Ltd.[1968] 21 S.T.C. 317., their Lordships also considered the question as to whether section 2(n) of the Madras Act, which included in the definition of "sale" such distribution of goods by a society or a club to its members, was ultra vires or not. Explanation I to the definition of sale in section 2(n) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h distribution sales would be within the category of "sales". This aspect would have great relevance in our subsequent discussion and, therefore, we have referred to it at this stage. As a result of the aforesaid discussion, the position that emerges is that so far as the main substantive definition is concerned in the first part of section 2(11), the present society cannot fall within the definition of a "dealer", because it never carried on the business of sales to its members with any profit-motive. The learned Advocate-General next argued that in any event the present case falls within the ratio of Enfield India Ltd.'s case[1968] 21 S.T.C. 317. , because the Legislature has by the two inclusive clauses in section 2(11) enlarged the definition in the main substantive part and has achieved the same object which was achieved in the Madras case by giving a wider definition of the term "business ", whether actuated by a profit-motive or not. It is well settled that the term "includes" is not only used by way of an addition but also by way of specification. In Dilworth v. Commissioner of Stamps[1899] A.C. 99 at p. 105., Lord Watson speaking for the judicial Committee of the Privy Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on payment of a price or of fees or subscription, as we have already shown from the ratio of the Enfield India Limited case[1968] 21 S.T.C. 317., the said inclusion is only by way of a particular specification and is in the same sense as sale within the meaning of the Sale of Goods Act. It only clarifies all doubts by way of abundant caution, that even such distribution supplies or sales between the society and its members would be covered within the genus of sale, so long as it is "sale" within the meaning of the Sale of Goods Act. Turning now to the definition of the expression "dealer" in section 2(11), on a plain literal construction, it means (1) any person, (2) who carries on the business, (3) of buying or selling goods, (4) in the State. Such a person who carries on such business of buying or selling goods in the State may be an individual person, natural or artificial, or even the Government, viz., Central or State Government, or even a society, a club or an association of persons. All these categories have been particularly specified in the two inclusive clauses only to clarify that they all belong to the same genus and to settle all doubts as to the person who carries on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess in the traditional sense, but we do not agree with him in this contention. In Kalidas v. State of Bombay A.I.R. 1955 S.C. 62., the Supreme Court had to interpret the expression "shop" in section 2(27) of the Bombay Shops and Establishments Act, 1948, and in that connection the expression "such business" had to be interpreted. The question had arisen in connection with the owner of a small establishment, called the Honesty Engineering Works, who employed three workers in his workshop and did business in a very small way by going to certain local mills, collecting orders from them for spare parts, manufacturing the parts so ordered in his workshop, delivering them to the mills when ready and collecting the money therefor. No buying or selling was done on the premises of the workshop and so, a question arose as to whether a concern of this nature was a "shop" within the meaning of section 2(27), which was as under: "'Shop' means any premises where goods are sold, either by retail or wholesale or where services are rendered to customers, and includes an office, a store room, godown, warehouse or work place, whether in the same premises or otherwise mainly used in connection with su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety to its members. This contention of the learned Advocate-General is also wholly misconceived and it ignores the ratio in the Enfield India Limited case[1968] 21 S.T.C. 317. Their Lordships have in terms pointed out that such distribution schemes wherever they are included would not enlarge the meaning of the "sale", because the Legislature has the taxing power only to tax those sales which come within the meaning of the Sale of Goods Act, i.e., in which there is a transfer of property in the goods. Even without any such inclusive words, such sales between the registered society and its members where there is a transfer of property for a monetary consideration would fall within the definition of "sale". Therefore, so far as the second inclusive part is concerned, it does not in any manner enlarge or add to the traditional concept of business. If at all, it particularly specifies that the business of sales may be of sales even as between the society and its members. It does not in any manner affect the ingredient of "business" which must still be fulfilled. The learned Advocate-General also argued that once the definition of "sale" included distribution schemes in section 2(28), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trued. Section 2(c) of that Act defines "dealer" as meaning any person who whether as principal or agent, carries on in Madhya Pradesh the business of selling or supplying goods, whether for commission, remuneration or otherwise and includes a firm, a partnership, a Hindu undivided family and the Central or a State Government or any of their departments and includes also a society or association, selling or supplying goods to its members. At page 453 the Division Bench, consisting of Vyas and Badkas, JJ., pointed out that in order that a person may be a dealer under the Act, he must do the business of selling or supplying goods. A society, club or association is referred to in the concluding portion of the definition of "dealer" and the concluding portion of the definition says that the term "dealer" includes also a society, club or association selling or supplying goods to its members. The well settled rule of construction requires that the two parts of the definition must be harmonized. The words "selling" or "supplying goods" occur in the earlier part of the definition of "dealer" and they also occur in the latter part of the definition, and at both the places they must be so co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance and the real position is concluded by the aforesaid decision so far as this Bench is concerned. In M.K. Ranganathan v. Government of MadrasA.I.R. 1955 S.C. 604., in view of the settled position of law as it prevailed before the amendment, the wide amendment in section 232(1) in the Companies Act by the general words "any sale held without leave of the court of any of the properties", was restricted to "sale effected through the intervention of the court and not to sales effected by the secured creditors without the intervention of the court," especially when these words were used in juxtaposition, with "any attachment, distress etc. put into force without the leave of the court against the estate or effects..." Their Lordships pointed out a well recognised rule of construction as under: "When two or more words which are susceptible of analogous meaning are coupled together noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, that is, the more general is restricted to a sense analogous to the less general: (Maxwell on Interpretation of Statutes, Edition 10, page 332). The judicial Committee of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental alteration in the law as it stood before the amendment was inserted in section 232(1) by Act 22 of 1936. Whereas before the amendment the secured creditor stood outside the winding up and could if the mortgage deed so provided, realise his security without the intervention of the court by effecting a sale either by private treaty or by public auction, no such sale could be effected by him after the amendment and that was certainly a fundamental alteration in the law which could not be effected unless one found words used which pointed unmistakably to that conclusion or unless such intention was expressed with irresistible clearness. Having regard to the circumstances under which the amendment was inserted in section 232(1) by Act 22 of 1936 and also having regard to the context we are not prepared to hold that the Legislature in inserting that amendment intended to effect a fundamental alteration in law with irresistible clearness. Such a great and sudden change of policy could not be attributed to the Legislature and it would be legitimate, therefore, to adopt the narrower interpretation of those words of the amendment rather than an interpretation which would have the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para. 257 at page 504 the following passage pertaining to construction of taxing statutes taken from Bedford v. Johnson102 Colo. 203; 78 Pac. (2) 373., is quoted: 'Statutes levying taxes or duties upon citizens will not be extended by implication beyond the clear import of the language used, nor will their operation be enlarged so as to embrace matters not specifically pointed out, although standing upon a close analogy, and all questions of doubt will be resolved against the Government and in favour of the citizen, and because burdens are not to be imposed beyond what the statute expressly imparts.'" Therefore, even if the term "include " is capable of the alternative meaning as contended for by the learned Advocate-General, and even if two constructions are possible, we must adopt the strict construction and resolve the doubt in favour of the subject, especially when such radical departure is involved from the pre-existing law and when such fundamental concept of business in the traditional sense in a taxing statute is sought to be altered on a mere implication from such vague words. There are also other provisions in the Act which indicate that business in the commercial se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n referred to even by the Tribunal but they would be hardly useful. The line of cases, represented by Southern Railway Co-operative Canteen v. Commercial Tax Officer[1967] 20 S.T.C. 96., is based on the definition, corresponding to the main part of our section 2(11) and in such cases it has been held that such a canteen would not be falling within the definition of a "dealer" as its distribution sales to its members would not be with a profit-motive, which is an ingredient of the term "business". In the other line of cases, represented by Southern Railway Employees' Workshop Canteen v. Deputy Commercial Tax Officer[1965] 16 S.T.C. 187 at p. 190., it has been held that in view of the amendment introduced by the Legislature in the term "business", which included business carried on, whether or not any profit accrued from such trade, the Legislature had provided wider inclusion and the profit-motive was, therefore, not held to be essential. So far as the present case is concerned, we hold that the Legislature has not given any such wider inclusion, and the principles of construction do not permit implication of any such radical alteration from the pre-existing law, as interpreted even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that it was not a registered dealer qua the sales in the canteen and, therefore, it was not taxable at all. The Tribunal was, therefore, right in holding that the society was not taxable merely because of the fact that the society held the registration certificate. Therefore, as regards the second question our answer must also be in the negative. In the result, my opinion on the questions referred to is as under: Question No. (1) in the negative, that is to say, the society is not a dealer within the meaning of section 2(11). Question No. (2) in the negative, that is to say, the society is not liable to pay tax during the period it held registration licence by virtue of section 22(5-A) of the Act. The State shall pay costs of this reference to the assessee. Reference is answered accordingly. In view of the difference of opinion between the two learned judges, the case came on for hearing before BHAGWATI, C.J., under clause 36 of the Letters Patent and the learned Chief justice delivered the following judgment on 11th November, 1968. BHAGWATI, C.J.-This reference comes before me on a difference of opinion between Divan, J., and Mehta, J. The reference arises out of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court: "(1) Whether on the facts and in the circumstances of the case the sales effected by the canteen during the periods from 16th February, 1960 to 30th June, 1960, 1st July, 1960 to 30th June, 1961, 1st July, 1961 to 30th June, 1962 and 1st July, 1962 to 30th June, 1963, the opponent-society is a dealer within the meaning of the definition of the term 'dealer' contained in clause (11) of section 2 of the Bombay Sales Tax Act, 1959? (2) If the answer to question No. (1) is in the negative, whether on the facts and in the circumstances of the case the opponent-society would still be liable to pay tax during the period it holds registration certificate by virtue of sub-section (5-A) of section 22 of the Bombay Sales Tax Act, 1959?" The reference was heard by a Division Bench of this Court consisting of Divan and Mehta, JJ., but on both the questions the learned judges could not agree and there was a difference of opinion. Divan, J., took the view that since there was no element of profit-motive in the activity of running the canteen, the assessee could not be said to be carrying on the business of buying or selling goods in the canteen so as to attract the main part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epends on a true interpretation of section 2(11) which defines the term "dealer" but in order to arrive at the true import of that definition, it is necessary to refer to the definitions of two other terms as well. Section 2(19) says: "(19) 'person' includes any company or association or body of individuals, whether incorporated or not, and also a Hindu undivided family, a firm and a local authority." Section 2(28) defines "sale" to mean: "(28)...a sale of goods made within the State, for cash or deferred payment or other valuable consideration, and includes any supply by a society or club or an association to its members on payment of a price or of fees or subscription, but does not include a mortgage, hypothecation, charge or pledge, and the words 'sell', 'buy' and 'purchase', with all their grammatical variations and cognate expressions, shall be construed accordingly." Section 2(11) defines a "dealer" in the following terms: "(11) 'dealer' means any person who whether for commission, remuneration or otherwise carries on the business of buying or selling goods in the State, and includes the Central Government, or any State Government, which carries on such business, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they raise an interesting question of construction of the definition of "dealer" in section 2(11). So far as the main part of the definition is concerned, there can be no doubt that the case of the assessee does not come within it. What the main part of the definition requires is that a dealer must be a person who carries on the business of buying or selling goods. I will assume with the revenue that the assessee is a person within the meaning of section 2(19) but the question is whether it could be said of the assessee that it was carrying on the business of buying or selling goods. The assessee was undoubtedly selling goods to its members but there was no element of profit-motive in it and in the absence of profit-motive, this activity could not be regarded as business. It is now well settled that in taxing statutes the word "business" must be understood to mean an activity which occupies the time, attention and labour of a person with the object of making profit. Whether profit in fact results or not is immaterial but the activity must necessarily involve a profit-motive and it must be pursued with the object of making profit. This is the view consistently taken by differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sale or use with a view to make profit out of the integrated activity of buying and disposal." The necessity of the element of profit-motive in a business was also emphasized by the Supreme Court in the State of Gujarat v. Raipur Manufacturing Co. Ltd.[1967] 19 S.T.C. 1. This was also a case in which the Supreme Court was called upon to consider whether a particular activity of selling stores, machinery and other sundry articles carried on by the assessee could be regarded as a business. Shah, J., speaking on behalf of the Supreme Court, after referring to Abdul Bakshi's case[1964] 15 S.T.C. 644., observed: "To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profitmotive, and not for sport or pleasure. 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 profitmotive. By the use of the expression 'profit-motive' it is not intended that profit must in fact be earned. Nor does the expression cover a mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it-motive. The question which arose was whether it was liable to pay sales tax under the Madras General Sales Tax Act, 1959, on its turnover from refreshments supplied to its members. Section 3 which was the charging section imposed a liability to sales tax on every dealer whose total turnover in a year was not less than ten thousand rupees. "Dealer" was defined in section 2(g) to mean: "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..... * * * Explanation.-A society (including a co-operative society), club or firm or an association which, whether or not in the course or business, buys, sells, supplies or distributes goods from or to its members for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purposes of this Act." Clause (n) of section 2 defined "sale" as follows: "'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y might partake of the nature of business even if it was not actuated by a profit-motive but if they are read properly in the context of the provisions of the Act, it will be apparent that they do not lay down any such absolute proposition. In the first place, it must be remembered that in this case the Supreme Court was not concerned with the question whether an activity can be regarded as business even in the absence of profit-motive. That was not the point before the Supreme Court and indeed it could not be, since the explanation to section 2(g) in so many terms dispensed with the requirement of business and even if the activity of the assessee in the absence of profit-motive could not be regarded as business, it was immaterial, for the assessee would in any event be deemed to be a dealer under the explanation to section 2(g). Moreover, the definition in section 2(d) gave a wider meaning to the term "business" by reason of the words "whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern" which had the effect of enlarging the ambit of the definition and it was in the context of this definition that Shah, J., said that a scheme for supplyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects who should be included in the category of such "person", one being "the Central Government or any State Government" and the other being "any society, club or other association of persons which buys goods from or sells goods to its members". As one runs through the definition it is clear that it is the idea of "person" in the main part of the definition which is carried into the two inclusive clauses and the words "who carried on the business of buying or selling goods in the State" which qualify "person" are applicable to the second inclusive clause as well. If the second inclusive clause were read as wholly disjunctive from the main part of the definition so as to form a totally independent clause complete in itself, the result would be that every society, club or other association of persons which buys goods from or sells goods to its members would be a dealer and all sales effected by such a society, club or other association, whether to members or to nonmembers and whether as part of a systematic and organized activity or otherwise, would become liable to sales tax. The adjectival clause "which buys goods from or sells to its members" qualifies "society, club or other ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... literary point of view, inelegant in the second inclusive clause. The omission of these words in the second inclusive clause appears to have been prompted more by convenience and elegance of drafting than by an intention to exclude the requirement of business. The revenue in the course of argument suggested one or two alternative formulae in which the Legislature could have couched the definition, if it wanted to introduce the requirement of business also in the second inclusive clause, but that can never be determinative of the true intent of the Legislature, for the Legislature may express itself in diverse ways and no inference can necessarily be drawn one way or the other because the Legislature has chosen to express itself in one of many ways. It is difficult to believe that the Legislature intended to make a radical departure from the existing state of the law by dispensing with the requirement of business in the case of societies, clubs or other associations buying goods from or selling goods to their members. If such had been the intention of the Legislature, I have no doubt that the Legislature would have expressed itself in clear and explicit language rather than leave i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a sale as a sale bring it within the ambit of the taxing statute. Of course now in view of the decision of the Supreme Court in Enfield India's case[1968] 21 S.T.C. 317., it is clear that supply by an incorporated society or club of goods to its members for valuable consideration would be a sale but there was at one time, as already pointed out, considerable doubt about it and the Legislature therefore introduced the inclusive clause in the definition of "sale" ex abundanti cautela with a view to eliminating such doubt. While introducing this inclusive clause in the definition of "sale", the Legislature also introduced for the purpose of completeness and symmetry of drafting the second inclusive clause in the definition of "dealer" as a counterpart of the inclusive clause in the definition of "sale". The Legislature was anxious to secure that the clarification made by introducing the inclusive clause in the definition of "sale" might not be rendered infructuous by an argument based on the absence of a corresponding inclusive clause in the definition of "dealer" and the Legislature, therefore, ex abundanti cautela, introduced the second inclusive clause. What the Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her association of persons which buys goods from or sells goods to its members within the category of "person" for the the purpose of the main part of the definition. The first question referred to this Court for its opinion must therefore be answered in the negative as proposed by Mehta, J. So far as the second question is concerned, it relates to the applicability of section 22, sub-section (5-A). I fail to see how that sub-section can have any application to the facts of the present case. The conditions requisite for the applicability of that sub-section are that it must be found by some authority under the Act that the person who has been registered as a dealer on his own application ought not to have been so registered and when that condition is satisfied, the sub-section declares that he shall be liable to pay tax on his sales or purchases made during the period commencing on the date on which his certificate took effect and ending with its cancellation, notwithstanding that he may not be liable to pay tax under section 3. The sub-section is intended to provide for a case where a person was not liable to pay tax under section 3 either by reason of the fact that he was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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