TMI Blog1990 (6) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... of the interests of motorists and providing means of social intercourse between them. The main objects of the company are to maintain and conduct a club for accommodation of its members and their friends, to provide a clubhouse and other conveniences and generally to afford to members and their friends all the usual privileges, advantages, convenience and accommodation of a club and to consider and discuss all questions affecting the interests of motorists and the alteration or administration of the law and all police and municipal rules and regulations relating to or anyway affecting them, to form and maintain a reading room and library of literature and to do all things that are incidental to or conducive to the attainment of the above objects or any of them. The income and property of the company are applied solely towards promotion of the said objects and, according to the memorandum of association, no proportion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to members. 4.. To achieve these objects the association provides all facilities and service to the car owners, who are its members. The association m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent No. 2 as to the levy of sales tax on the supply of refreshments to its members the applicant made an application for registration as a dealer under section 7 of the Act describing itself as manufacturer of the refreshments and/or preparations. On the said application it was granted a registration certificate dated 1st September, 1987, as manufacturer of cooked food with effect from II th August, 1987. Thereafter on legal advice that no sales tax is leviable on the supply of refreshments and preparations to its members, the applicant requested the Commercial Tax Officer, Bhawanipore Charge, by a letter dated 18th April, 1988, to allow it to withdraw the said application for registration on the ground that it was made on a mistaken interpretation of law. The respondents did not take any action on the said letter. Meanwhile, the said Commercial Tax Officer, respondent No. 3, issued three notices dated 16th February, 1988, directing the applicant to produce books of accounts and other documents on 27th July, 1988, for the purpose of assessment for the impugned period. These notices have been challenged by the applicant on the ground that as the club was not a dealer an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in this connection to refer to the definition of "business" in the Act. The definition of "business" was first introduced in the Act in 1967 and was subsequently amended with effect from 1st April, 1979, to include contracts also. The definition was further amended with effect from 1st April, 1984, by substituting "works contract" in place of "contract" making it more clear and explicit. The definition, as it stands now, is as follows: "(1a) 'business' includes- (i) any trade, commerce or manufacture or execution of works contract or any adventure or concern in the nature of trade, commerce or manufacture or execution of works contract, whether or not such trade, commerce, manufacture, execution of works contract, adventure or concern is carried on with the motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, execution of works contract, adventure or concern; and (ii) any transaction in connection with, or ancillary or incidental to, such trade, commerce, manufacture, execution of works contract, adventure or concern." 11.. It is clear from the above definition that the question of any profit-motive or accrual of any profit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the taxing provisions. According to the definition in the said Act "business" includes any trade, commerce and manufacture or any adventure or concern in the nature of trade, commerce or manufacture. This case is clearly distinguishable as it is purely a research Organisation having the remotest connection with any kind of business involving profit-motive or profit as contemplated in the relevant statute. 14.. In Mehsana District Shanker-4 Seeds Produce and Sale Co-operative Society Ltd. v. State of Gujarat [1982] 51 STC 289, the Gujarat High Court was dealing with the case of a co-operative society, which was engaged in rendering certain services to its members in the course of the main activity of implementation of the Government scheme of betterment of the quality of cotton. According to the Gujarat Sales Tax Act, 1969, an activity in order to be business must be a commercial activity of buying and selling with or without motive to earn profit. If the commercial element is lacking in a given activity and if such activity is in the nature of mere service or profession it would be beyond the sweep of the term "business" as defined in the said Act and if in accordance with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the West Bengal Act "business" has been specifically defined with the result that one can carry on trade or business with or without profit motive. The decision in this case, therefore, is not going to help the applicant. 16.. Another case cited on behalf of the applicant is Wainganga Club v. State of Madhya Pradesh [1979] 44 STC 268 decided by a Division Bench of the Madhya Pradesh High Court. According to the Madhya Pradesh General Sales Tax Act, 1958, before a person can be made liable to purchase tax he has to be a dealer and the goods purchased by him should be in the course of his business. The matter related to the interpretation of the word "business", before the insertion of the definition of the said word in the statute. The court referred to the normal connotation of the word in taxing statutes and observed that this is to be understood 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 and not for sport or pleasure. It was held that the petitioner, a members' club, constituted mainly by its members for pleasure and which not being a legal entity, purchased liquor for supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified circumstances or any person making a sale under section 6D and includesthe Central or a State Government, a local authority, a statutory body, a trust or other body corporate which, or a liquidator or receiver appointed by a court in respect of a person defined as a dealer under this clause who, whether or not in the course of business sells, supplies or distributes directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration. Explanation 1.-A co-operative society or a club or any association which sells goods to its members is a dealer. Explanation 2.-..............." 19.. It appears from the memorandum and articles of association of the Automobile Association of Eastern India that the main object of the company is to establish, maintain and conduct a club for its members and their friends in order to promote the interests of motorists and to provide means of social intercourse between them. The supply of refreshments to the members and their guests in the club is an activity akin to business and also amounts to sale. The fact that it is sale will appear from what we shall presently discuss. A club supplying re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered to be absent. 23.. The learned Advocate for the applicant argued that a dealer is a person, who carries on the business of selling goods and according to the explanation to the definition of "dealer", a club, which sells goods to its members is a dealer. It is contended that the function of explanation is not to effect a fundamental change in the character of the transaction and hence the club while selling goods to its members must do it in the course of business to become liable as a dealer. He further contended that the club is not carrying on any business and the service rendered to the members by way of supplying refreshments cannot partake of the character of sale in the course of business and, therefore, it is not a dealer. 24.. The learned Advocate for the applicant relied on a decision of the Supreme Court in Joint Commercial Tax Officer v. Young Men's Indian Association [1970] 26 STC 241; AIR 1970 SC 1212, as authority for the proposition that the supply of refreshments by a club to its members does not constitute sale as it is "analogous to that of an agent or mandatory investing his own money for preparing things for consumption of the principal and later recou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction will not be regarded as a sale, for the club is the agency through which the members have arranged that the refreshments, beverages, and other articles should be made available. The test in each case is whether the club transfers property belonging to it for a price or the club acts as an agent for making available property belonging to its members." 26.. The question that arises for decision here is whether the transactions by the club in this case partake of the nature of those between the principal and the agent and hence could not constitute sale. It is necessary to examine the club rules, bye-laws and the facts disclosed in the affidavits to ascertain the actual nature of the transactions to determine if these relate to an agency arrangement or sale. It appears from the club rules and the bye-laws that not only members and their guests but also vehicular tourists from foreign countries are allowed certain facilities. Besides the use of retiring room, "chota-hazri" may be arranged on payment of charges thereof. It is not, therefore, a case of the club supplying refreshments to its members only, but in a restricted way to certain non-members also. Moreover, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mally has to be read as to harmonise with, and clear up any ambiguity in the main section. Actually it is a sort of an extension of the inclusive definition. It is pertinent to note that explanation I specifically excludes any reference to business. It is thus the intention of the Legislature to clearly state that a club, a co-operative society or any association, which sells goods to its members is a dealer, even though the transactions may not be in the course of business. 28.. We have alrealy decided in the facts and circumstances of this particular case that the applicant has been carrying on business of selling. Even if it had been selling not in the course of business, there was no bar to its being a dealer in case it was otherwise so. 29.. To establish that the applicant is a dealer, the learned State Representative cited as authority a decision of the Supreme Court in Member, Board of Revenue v. Controller of Stores, Eastern Railway [1989] 74 STC 5. It was held in that case that the South Eastern Railway was a carrier of goods and its activity of selling goods unclaimed was adjunctive to its principal activity of carriage of goods and hence it was a dealer for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. The learned State Representative, however, submitted that there was already a provision in the Act in 1979 or even earlier, for treating a club or an association, incorporated or unincorporated, or body of persons selling goods to its members as a dealer but since the supply of such goods could not be treated as deemed sale before the Forty-sixth Amendment of the Constitution and the consequent amendment of the definition of "sale" on 1st October, 1983, with retrospective effect, the said provision remained dormant or in a state of suspended animation. He, therefore, refuted the contention of the learned Advocate for the applicant that a new legislative provision with regard to a club, unincorporated association or body of persons was necessary. 31.. It is clear, however, that the Forty-sixth Amendment of the Constitution only validated the law, which was passed before the commencement of the said amendment, which authorised the imposition of a tax on food and drinks supplied in a restaurant or eating house or others. It was only the lack ..... X X X X Extracts X X X X X X X X Extracts X X X X
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