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2015 (4) TMI 458 - BOMBAY HIGH COURT

2015 (4) TMI 458 - BOMBAY HIGH COURT - TMI - Dealer or not - Charitable trust - Whether Tribunal was justified in holding that the appellant's activity of manufacture and sale of sweetmeats and farsan is integral and incidental to his main charitable activity, and that therefore the appellant is not a 'dealer' and does not carry on 'business' qua its activity of manufacture and sale of sweetmeats and farsan - Held that:- trust was formed with an object of providing pure drink .....

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whereas it is part of the orders passed by the Revenue, from time to time, that the sweetmeats and farsan are sold to the general public. - From the conduct of the assessee, it appears that the very activity of manufacture and sale of farsan and sweetmeats, is also not ancillary to the main object of the trust, but the same activity is carried out as purely business activity and that too on large basis continuously and having sizable volume.

It is nowhere provided in the object of the .....

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anage Pyaus, to manage and run Ganesh Bhandar and to provide food, sweetmeats and other delicious food free of charge or at concessional rate. This is not a sale of literature or other material having any bearing on the teaching and message of somebody as revered as Saibaba. It is a proper commercial activity and aimed at garnering revenue. It is now established and is in place under the distinctive name and style. The sale of sweetmeats, farsan to general public cannot be equalled with a activi .....

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onduct the business in carrying out the incidental or ancillary activity. In our opinion, the Revenue has rightly discharged its burden by bringing on record from the observations made herein above, that the activity of the assessee trust is not incidental or ancillary to the main object of the trust, hence termed as 'business' having regard to its nature, viz. continuity, voluminous, etc. - Court is alive to the fact that the profit motive will have hardly any bearing over declaring the .....

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Revenue. - Sales Tax Reference No. 33 of 2009, Reference Application No. 68 of 2001, Writ Petition No. 2539 of 2006, Sales Tax Reference No. 33 of 2009, Reference Application No. 68 of 2001 - Dated:- 30-3-2015 - S. C. Dharmadhikari And N. W. Sambre,JJ. For the Appellant : Mrs Uma Palsuledesai, AGP For the Respondents Rep by: Mr Pradeep S Jetly, Sr. Adv. & Mr Ameet Gedam, Adv. JUDGMENT (Per N. W. Sambre,J. ) The Reference Application is preferred by the Revenue, seeking the following question .....

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ats and farsan is integral and incidental to his main charitable activity, and that therefore the appellant is not a 'dealer' and does not carry on 'business' qua its activity of manufacture and sale of sweetmeats and farsan ?" 2. Few facts necessary for consideration of the Reference are as under :- The petitioner in the writ petition referred above (hereinafter referred to as "the trust", for the sake of brevity) is a charitable trust, registered in the year 1960 .....

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h Bhandar" wherein sweetmeats, farsan, etc. are manufactured and sold. It is claimed by the trust that the said shop activity of preparation and selling of sweetmeats, farsan, etc. is carried out on 'no profit no loss' basis and profits, if any accrued, are spent on the charitable purpose for achieving its object. It is further alleged that the shop activity was started in the year 1968 and pursuant to an application to the Sales Tax Department, registration certificate No.NID-16972 .....

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he Enforcement Branch of the Revenue issued show cause notice to the trust proposing to levy tax/penalty as the trust carried on business without obtaining registration certificate. The said show cause notice prompted the trust to move determination application dated 30th May, 1998, seeking clarification, whether it is a registered dealer as per section 2 (11) of the Bombay Act, which was decided on 15th July, 1990. The Commissioner, however, rejected the contention that the shop activity is int .....

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n appeal before the Tribunal being Appeal No.148 of 1999, which was decided on 25th January, 2001. The Tribunal, having regard to the provisions of the trust deed held that the petitioner's shop activity is integral and incidental to main charitable activity as the activity is carried on in accordance with the trust deed and the income derived from the shop activity is spent on achieving charitable object of the trust. 8. The above referred view of the Tribunal has prompted the Revenue to fi .....

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nture or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern and any transaction in connection with, or incidental or ancillary to, the commencement or closure of such trade, commerce, manufacture, adventure or concern; (11) "dealer" means any person who wh .....

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10. Section 3 of the Bombay Act manifests the liability to pay sales tax and same is on the dealer, which reads thus:- "Incidence of tax (1) Every dealer whose turnover either of all sales or of all purchases, made during (i) the year ending on the 31st day of March 1991 or, (ii) the year commencing on the 1st day of April 1981, has exceeded or exceeds the relevant limit specified in sub-section (4) shall until such liability ceases under sub-section (3), be liable to pay tax under this Ac .....

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nal rate or in cheap to needy and deserving persons; v) To impart and promote secular education.......... vi) To undertake and carry research in the science of Spiritualism Yoga, Astrology, etc. vii) To erect or assist in the erection, construction, management and maintenance of memorials of Saints, etc. viii) To render medical aid............ - 12. The Revenue, while seeking answer of the Reference in its favour would urge that the plain reading of the definition of term "business" an .....

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profit out of the same and as such must be registered as a 'dealer.' 13. It is further claimed by the Revenue that the activity of the trust of manufacturing sweetmeats and farsan, etc. is a regular, continuous and of sizable volume and thus the trust is amenable to pay sales tax. 14. According to Revenue, the judgment of the Apex Court in the matter of Commissioner of Sales Tax vs. Sai Publication Fund, reported in (2002) 4 SCC 57, has hardly any application to the issue under reference .....

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h Court, in the matter of M/s Manipal University, Represented by its Registrar vs. The State of Karnataka, Department of Finance, By its Secretary, reported in ILR 2014 Karnataka 5582. In addition to above, he would urge that irrespective of profit motive of the trust, the activity of manufacture of sweetmeats and farsan was found to be on large scale, the sale of the same to the public at large, the volume, frequency, continuity and regularity of the transaction of sale covers the same within t .....

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, Mr Jetly has invited our attention to the object of the trust with which it was formed and the activity undertaken by the trust, so as to achieve the said object. He would further urge that the term 'dealer' defined in the provisions of the Maharashtra Value Added Tax Act, 2002 has undergone amendment and the public charitable trust was included in the definition of 'dealer', with effect from 1st April, 2005. According to him, the only inference that can be drawn is, prior to t .....

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basis as business, as according to him, profit made out of the same was utilized for the purpose of achieving the main object of the trust, i.e. charity. He would further urge that in the trust deed, one of the objects of the said trust is to conduct, maintain, manage and run Shri Ganesh Bhandar at Narayanwadi from where the sweetmeats and farsan is sold. According to him, clause (4) of the objects provides for providing food (including sweetmeats and other delicious food) free of charge or at a .....

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Public Trusts Act, 1950, under which the assessee is registered, could be termed as activity of general public utility. The charitable purpose as is provided under section 9 of the Maharashtra Public Trusts Act speaks of poverty or distress, education, medical relief, provision for facilitation for recreation or other leisure time occupation........... and the advancement of other objects of general public utility, however, excludes exclusive religious teaching or worship. The facilities which .....

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of farsan and sweetmeats is taken up. Though it is claimed by the assessee that the sweetmeats and farsan are made available to the devotees at concessional rate, no material is brought on record to demonstrate that the said activities of sale of sweetmeats and farsan, etc. are restricted to the persons interested, whereas it is part of the orders passed by the Revenue, from time to time, that the sweetmeats and farsan are sold to the general public. 19. The said object of the trust of manufact .....

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ed that upon the claim made by the trust, the Tribunal in its judgment has observed that the perusal of the audited accounts and tax audit reports of the assessee trust reflects income from donations, interest and sales effected from the shop are used for the expenditure of the trust is shown towards the water supply, cultural programmes and ceremonies. The expenditure towards shop is shown under the heads "raw material, salary, wages, staff welfare, packing material, rent, rates and taxes, .....

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ps. and ₹ 9,96,055.09 ps., respectively. The said figures justify the carrying out of the activity on very large scale in sizable volume, a continuous one and with a regular frequency. Thus, the activity is complete commercial in nature. 22. So far as the contention of the assessee that the issue is covered by the judgment of the Apex Court in the matter of Commissioner of Sales Tax vs. Sai Publication Fund (cited supra) is concerned, in the said case the trust was formed with an object t .....

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the issue of 'business' and 'dealer' in favour of the said assessee, the Apex Court has observed that the sole object of assessee trust in the said case was to spread message of Saibaba. The sale of literature and books containing message of Saibaba to its devotees, at cost price, could be termed as 'non business activity' which is ancillary to the main activity of spreading of message, which is not a business activity. The Apex Court held that the activity of publishing .....

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within the meaning of Section 2(11) read with Section 2(5A) requires careful scrutiny. As is evident from Section 2(11), every person is not "dealer" but only those persons "who carry on the business" by buying or selling goods are regarded as "dealers". From the very definition of dealer, it follows that a person would not be a dealer in respect of the goods sold or purchased by him unless he carries on the business of buying and selling such goods. "Dealer&qu .....

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virtue of definition of "dealer" contained in Section 2(11) of the Act. As rightly noticed by the High Court, it is clear from charging Section 3 that every dealer, whose turnover of sale or purchase during any year exceeds the limits specified therein, is liable to payment of tax under the Act on his turnover of sales or purchases. Although the Act provides for levy of tax on the sales or purchases of certain goods in the State of Maharashtra, the levy is restricted only to sales or .....

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ntaining the message of Saibaba were distributed by the Trust to the devotees of Saibaba at cost price. There is no dispute that the primary and dominant activity of the Trust is to spread the message of Saibaba. This main activity does not amount to "business". The activity of publishing and selling literature, books and other literature is obviously incidental or ancillary to the main activity of spreading message of Saibaba and not to any business as such even without profit motive .....

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e definition of "business" given in Section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would not normally amount .....

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erently, the inclusion of incidental or ancillary activity in the definition of "business" pre-supposes the existence of trade, commerce etc. The definition of "dealer" contained in Section 2(11) of the Act clearly indicates that in order to hold a person to be a "dealer", he must carry on business' and then only he may also be deemed to be carrying on business in respect of transaction incidental or ancillary thereto. We have stated above that the main and domi .....

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urt is applied to the facts of the present case, what is noticed in the present case is, it is nowhere provided in the object of the trust to manufacture farsan and sweetmeats and to sell the same in open market, that too on large scale, in sizable volume with a continuous and regular activity. The profit earned out of the said activity is said to have been used for the purpose of achieving the object of the trust, however, the said activity of preparation of sweetmeats and farsan and selling th .....

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is in place under the distinctive name and style. The sale of sweetmeats, farsan to general public cannot be equalled with a activity noticed by the Hon'ble Supreme Court and associated with Saibaba and his followers. 25. In that view of the matter, it is required to be held that the activity of manufacture of farsan and sweetmeats is a 'business' activity within the meaning of section 2 (5-A) of the Bombay Act and the assessee is required to be registered as dealer and as such is l .....

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ity from the sale of prospectus and application forms was ₹ 2.55 crores, in 2006-07 ₹ 5.62 crores, in 2007-08 ₹ 4.46 crores, in 2008-09 ₹ 4.27 crores and in 2009-2010 it was ₹ 3.61 crores. Insofar as the year 2009-2010 is concerned for the period between April 2009 to December 2009 the sale, was ₹ 1.37 crores. The figures of receipts from the sale of prospectus clearly demonstrate that the University collect huge amounts every year from the sale of prospectus. .....

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ing every academic year. The volume, frequency, continuity and regularity of transaction of sale is not in dispute. They earn huge profits/surplus from the sale of prospectus/application forms. Therefore, looking at the price at which prospectus and application forms were sold and huge amounts were collected by the University during the relevant period, it cannot be stated that they were not "carrying on business". We have perused the figures of the receipts of every month during the r .....

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herefore, it cannot be stated that there was no profit motive as claimed by the University. Merely because, the University was established for imparting education does not mean that it is not indulging in the business so as to make profit out of the sale of prospectus and application forms. Their intention to make profit is clear from the facts and figures placed on record." In the said judgment, the Division Bench considered the judgment of the Apex Court in the matter of Commissioner of S .....

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y, the intention that could be gathered is to conduct the business in carrying out the incidental or ancillary activity. In our opinion, the Revenue has rightly discharged its burden by bringing on record from the observations made herein above, that the activity of the assessee trust is not incidental or ancillary to the main object of the trust, hence termed as 'business' having regard to its nature, viz. continuity, voluminous, etc. 27. Even this Court is alive to the fact that the pr .....

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