Facts

The respondent assessee was a trust created by some devotees of Saibaba of Shirdi with an object of spreading message of Saibaba. In furtherance and to accomplish this object, the trust published some books, pamphlets and other literature containing such messages and sold them at nominal price to recoup only cost. The sale proceeds go to the trust in form part of the trust property to      be utilised only for furthering the objects of the trust. There was a specific clause   in the Trust Deed that if the Trust is unable to carry out its specific objects, the balance funds of the Trust would be returned to Shirdi Sansthanam. The Trust sought determination of the question under section 52(1)(a) of the Act from the Commissioner whether it is a “dealer” and it carries on “business” as defined under the Act. The Deputy Commissioner of Sales Tax  held that the Trust was        a “dealer” and was carrying on “business” to the extent of such publication and  sale of books and other literature, in view of the amended definition of “business” w.e.f. 16-08-1985.

Issue

• Whether Trust is a “dealer” under section 2(11) of the Act?

2)             Whether Trust  is carrying on “business” as defined under section 2(5-A)  of the Act qua its activity of publishing and selling books, pamphlets and other literature containing message of Saibaba?

View

The main object of the Trust is spreading messages of Saibaba which is charitable in nature and does not amount to “business” as can be inferred from the Trust  Deed and object clause therein. The activity of publishing literature containing such message is only ancillary or incidental to the main activity and does not amount to “business” unless an independent intention to carry on business can be

established. The onus to prove such intention lies on the department who alleges that it is business activity. The definition of “dealer” in section 2(11) presupposes that the person carries on “business”. If the main activity is not business, then incidental activity also cannot be business and such person cannot be held as “dealer”.

The question of profit motive or no profit motive would arise only if the person carries on an activity in the nature of trade, commerce, manufacture or adventure in the nature of trade or commerce. In case of the present Trust,  the activity did  not amount to “business” irrespective of profit motive. However, the Court noted that whether a person is a “dealer” or carries on “business” has to be examined     on the facts of each case and no general conclusion can be drawn.

State of TN v. Board of Trustees of the Port of Madras was referred to drive  home a point that “business” is a term normally used in taxing statute to denote occupation, profession which occupies time, labour and attention of a person, normally with a profit motive and with a degree of continuity and not just for  sport or pleasure. The expression “carrying on business” means more than just buying and selling the goods. The volume, frequency, continuity and regularity     of transactions in a class of goods, ordinarily with a motive to earn profit, decide whether a person is carrying on business or not. Even if profit motive is statutorily excluded from the definition of “business”, yet the person could be doing business.

The case of State of Bombay v. Ahmedabad Education Society was also considered. The main object of the society in that case was to establish a college and spread education. For  the  purpose, it had  to  construct a  building. It established a brick kiln for use in construction. The scrap of the bricks and surplus quantity was sold by it at cost price. It was held that society was notdoing “business” qua the sale of bricks but the said activity was just incidental to the main object which was not “business”. Many other decisions e.g. Giridharilal Jivanlal v. CST, Tirumala Tirupati Devasthanam, v. State of Madras, State of  TN v. Cement Research Institute of India, Indian Institute of Technology v. State of UP etc. were discussed and finally the Court concluded that the main activity must be “business” in order to make the ancillary/incidental activities as “business” unless it is established that such activities were actually carried out as business. [CA Nos. 9445 of 1996 and 1716 of 1999 dt. 22-03-2002]

Editorial :The term “business” is defined under section 2(17) of the CGST/ SGST Act. The clause (a) thereof states that “any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not

it is for a pecuniary benefit” is business and clause (b) states that “any activity       or transaction in connection with or incidental or ancillary to sub-clause (a)” is  also business. The definition indicates that the main activity must amount to business in order to make the incidental activity also a business. The condition     of profit motive is excluded but basically the activity must be in the nature of  trade, commerce, manufacture etc. Thus, the ratio of above judgment may be applicable to GST as well but the issue needs to be contested before appropriate forum. The impact of exemption notifications under Central Tax  (rates) may also  be considered whiledeciding the liability under the CGST Act.

“Before the throne of the Almighty, man will be judged not by his acts but by his intentions. For God alone reads our hearts.”

– Mahatma Gandhi