MADRAS ELECTRICITY DEPARTMENT CANTEEN MADRAS Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE petitioner before us is the Electricity Department Canteen, Mount Road, Madras, and the question raised is whether the sales turnover of this canteen for the year 1954-55 is within the ambit of the Madras General Sales Tax Act, 1939. THE canteen consists of about 500 members with a share capital of Rs. 2, 500. It is stated that the object and purpose of this canteen is mainly to serve the members of the canteen with lunch and tiffin, but it is conceded that there is no prohibition, in the byelaws governing the canteen, of sale of lunch and tiffin to outside persons. THE question for consideration is whether the canteen is a "dealer" within the Act and whether the transactions of this canteen can be called 'sales" within the meaning of that expression in the Act. Whatever may be the position where the catering is strictly confined to the members of the canteen, if the canteen also catered to outsiders, it is impossible to hold that there has been no sale. THEre have been instances in the past where the canteen had supplied to an outside body, like the Burmah Shell Company. That this canteen has been supplying to persons other than the members is fully borne out by the evidence placed before the taxing authorities and in fact it is not now controverted before us.

(2.) LEARNED counsel for the petitioner submitted that there was no profit motive on the part of the canteen when it catered to outside persons. The Tribunal has drawn the inference that there must have been a profit motive because in the year of assessment, the canteen earned a gross profit of Rs. 4, 035-10-0 and a net profit of Rs. 2, 210-15-9. The actual earning of profit is no doubt a relevant criterion in deciding the issue whether there was a profit motive on the part of the canteen. But even apart from the actual earning of a profit, if the activity of the canteen was not confined only to members but also extended to the supply of lunch and tiffin to others, there cannot be any absence of profit motive. Catering to persons outside the members of the canteen necessarily implies that the canteen had a business or a profit motive. It is impossible to designate sales to outsiders as not comprised in a business activity. Our attention has been drawn to the decision of the Bombay High Court in State of Bombay v. Ahmedabad Education Society In that case an Education Society started arts colleges and in furtherance of the objects of the society they gave a contract to a contractor for construction of buildings for colleges, residential quarters for the staff and hostels for students. The surplus brick or building material which was left after the completion of the contract work was sold by the society at cost price to other societies.