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2017 Supreme(UK) 341
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Rajiv Sharma, J.
Manava Bharti International School – Petitioner
Versus
State & others – Respondents
Writ Petition (M/S) No. 779 of 2011
Decided On : 21-11-2017
For the Petitioner:Mr. P.R. Mullick, Advocate
For the Respondent: Mr. B.S. Parihar, Standing Counsel
The main legal point established in the judgment is that the primary and dominant activity of an educational institution must be 'business' for it to be treated as a dealer under the Uttarakhand Value Added Tax Act, 2005.
Headnote:
Value Added Tax - Educational Institution - Uttarakhand Value Added Tax Act, 2005 - Section 2(6), 2(11), 2(40), 2(41), 2(42), 2(48), 3 - The court held that the primary and dominant activity of the petitioner-school is to impart education and providing food to the students is an ancillary activity. The profit is an integral part of the predominant academic purpose. The court further held that the school cannot be treated as a dealer as it is not engaged in a business activity as per Section 2(6) of the Act. The court also referred to various decisions to establish that the main activity must be 'business' and that incidental or ancillary activity may not come within the meaning of 'business'.
Fact of the Case:
The petitioner-school, primarily an educational institution, was providing food to its students as an ancillary activity. The school was issued a notice to deposit a sum of money under the Uttarakhand Value Added Tax Act, 2005, which the school contested on the grounds that it was not engaged in a business activity and therefore not liable to tax.
Finding of the Court:
The court found that the primary and dominant activity of the petitioner-school is to impart education and providing food to the students is an ancillary activity. The court held that the school cannot be treated as a dealer as it is not engaged in a business activity as per Section 2(6) of the Act.
Issues: The main issue was whether the petitioner-school's provision of food to its students constituted a business activity under the Uttarakhand Value Added Tax Act, 2005.
Ratio Decidendi: The court established that the main activity must be 'business' and that incidental or ancillary activity may not come within the meaning of 'business'. It further emphasized that the profit is an integral part of the predominant academic purpose.
Final Decision: The court allowed the writ petition, quashed the notices and assessment orders, and held that the petitioner-school is not liable to be taxed under the Act.
Rajiv Sharma, J.
Petitioner-society is running a co-educational day cum residential school. It was established in the year 1941 to impart education without discrimination on the basis of caste, creed or religion. The name of the petitioner-school was changed to Manava Bharti India International School in the year 1992. The main objects of the petitioner-school inter-alia are as under:-
(a). To promote the advancement of the various aspects of India Culture, as an integral and dynamic force, in the renaissance of the nation.
(b). To evolve and encourage an indigenous system of education, based on the latest scientific researches and in harmony with a glorious past and the living present and which should prepare the nation to play her role in moulding the destiny of mankind.
(c). To establish cordial and intimate relations between India and the world, through mutual sympathetic understanding of their respective civilizations.
(d). To make original investigations into the domain of Indian Culture, thought and literature.
(e). To plan and promulgate socio-economic reconstruction of the country, based on artistic and cultural foundation.
(f). To publish journals, magazines, pamphlets and books, either for sale or free distribution.
(g). To reorganize and encourage cultural, economic youth common wealth in form of small model villages self-supporting and self-sufficient as far as possible.
(h). To organize cultural expeditions, tours and excursions with a view to establish cordial and intimate relations between India and the world.
2. The primary objective/ prime activity of the petitioner-school, is to impart education. The curriculum of the school is based on CBSE pattern. There were about 180 students, who were pursuing their studies in the school. 80 students were boarders and about 100 students were day scholars.
3. Petitioner-school is operating a mess/catering activity for preparing and providing food to the residential scholars (boarders), without engaging any outside caterer, as part of school curriculum. Petitioner is providing free breakfast, lunch, supper, evening snacks, dinner etc. to its boarders, residing in the school. The school also provides refreshment, snacks and food during the parents teachers meet.
4. The petitioner, as per the averments made in the petition is not separately realizing any money against mess/catering activities. The case of the petitioner-school is also that it is not selling any food. The school books and stationery items are provided by outside dealer, who visits the school campus and supplies the books and stationery as per requisition of the students. The students, being minor, signed the slip and the petitioner-school bills the cost of the said books and stationery to the parents and reimburse the amount to the dealer concerned.
5. The petitioner-school was issued notice on 20.03.2008 followed by letter dated 23.03.2008. Petitioner is aggrieved by the order dated 11.11.2010, whereby the petitioner-school has been called upon to deposit a sum of Rs.66,750/- within 60 days, failing which penalty would be levied. Petitioner-school has been issued notice vide Annexure Nos.10, 11, 12 and 13.
6. The principal ground taken by the petitioner-school is that the primary and predominant activity of the petitioner is to impart education to the students, which is not a business activity. The supply of food stuff to boarders is only an incidental and ancillary activity, which does not amount to a “sale”. Such activity does not amount to “business”, as contemplated under the Act. Petitioner-school further contention is that it is not a dealer carrying on business of selling food stuff, therefore, is not liable to tax. It is lastly contended that the Uttarakhand Value Added Tax Act, 2005 is not applicable to the petitioner-school.
7. The case of the respondents, as per the reply, is that the school is running a mess. The lumpsum fee is charged from the students. It is also contended in the reply, as per the
