Read:-1. Application dated 25-7-2005 under Section 56 of
the Maharashtra Value Added Tax Act, 2002 by M/s. Bombay
Natural History Society.
2. This office letter dated 16th November, 2005
calling the applicant for hearing on 22-11-2005.
3. Letter dated
31-10-2005
from M/s. Bombay Natural History Society.
Heard:- Shri J.P.Deore [CA] and Shri Naresh
Chaturvedi,curator
attended.
PROCEEDINGS
(Under Section 56 of the Maharashtra Value Added Tax Act,
2002)
No.DDQ-10/05/Adm-5/116/B-1 Mumbai,dt. 06/03/2006
An application is received from M/s. Bombay
Natural History Society, having its office at Hornbill
House, Dr. Salim Ali Chowk, (opp. Lion Gate), Shaheed Bhagat
Singh Road,
Mumbai-400 023. The applicant has sought to determine the
following question:-
“ Whether the society, an educational
institution carrying on the educational activities like
buying or selling goods in the performance of its function
for achieving its objectives, is a deemed dealer within the
meaning of Section 2(8)(iv-a) of the Maharashtra Value Added
Tax Act, 2002.
02. BACKGROUND OF THE CASE
M/s. Bombay Natural History Society (hereinafter called as
the “BNHS”) is founded in the year 1883. It is the largest
non-governmental organization in the sub-continent engaged
in the conservation of nature and natural resources,
education and research in natural history. The activities
of the society are spread in more than 30 countries. Its
main emphasis is on nature education. It conducts several
innovative programmes aimed at environmental awareness
amongst various target groups. The society is also an
educational institution. It imparts training to Post
graduate and doctorate students in the faculty of Botany,
Ecology, Zoology, and Ornithology. It is affiliated to the
Mumbai University and is declared by the University as -
“the institution fit to receive Central assistance in
terms of rules framed under section 18(A) of the University
Grants Commission Act“. It is an institute recognized
by the Mumbai University for conducting post graduate
courses in Master’s and Doctoral degrees in the field of
Ornithology & Zoology by research. It is also recognized by
the Govt. of Maharashtra as an institution of higher
education and research. It also receives grants from the
Govt. of Maharashtra. It is duly registered under the
Societies Registration Act. It is also certified as a
Public Trust under the Bombay Public Trusts Act, 1950.
03. OBJECTIVES AND ACTIVITIES
The main objectives of the BNHS are :
1)
Scientific research and education in natural history and
nature conservation.
2) Interaction with policy makers, legislators, industry and
the public for protection of natural habitats.
3) Conservation
awareness among masses through research, education,
literature, awareness campaigns and conservation movements.
RESEARCH
The society’s guiding principle has always been
that conservation must be based on scientific research.
These studies have provided crucial data for management and
conservation of India’s rich bio-diversity. The research
contributes mainly to identify, monitor and mitigate the
adverse impact of unplanned, non-sustainable developmental
processes on our natural environment. This is achieved by
conducting research on indicator species of plants and
mammals in sensitive natural habitats across the country.
It has been realized that healthy environment can play a
crucial role in the long term sustainable development of the
region resulting in the upliftment of the local population.
The BNHS research projects are designed to mitigate the
adverse impact of developmental projects on the ecosensitive
areas as well as restoration of degraded environment.
Ministry of Environment and Forests, Government of India,
has recognized BNHS as the regional nodal agency to hold
wildlife regional meetings in the western region of India,
comprising of the states of Maharashtra, Goa, Rajasthan, and
Gujarat.
ENVIRONMENT PROTECTION
BNHS has rich technical expertise of committed
and qualified scientists and field biologists. The
scientists depend on sophisticated laboratory and a
full-fledged computer section with advanced software for
necessary environmental impact analysis (EIA). Both the
Government as well as the private sector rely upon the
findings of the studies for planning developmental
activities and declaring some of the protected areas.
SCIENTIFIC EDUCATION
Since 1957 the BNHS is a postgraduate
department, affiliated to the University of Bombay and
offers M.Sc (by research) and Ph.d degrees in Ecology and
Conservation Biology. It now has a total capacity of 20
seats for M.Sc and 20 for Ph.D students.
SCIENTIFIC COLLABORATION
The scientific research of the BNHS has been
conducted in many cases by scientific collaboration with
international institutions.
LEGISLATION FOR THE PROTECTION OF WILDLIFE
The BNHS was closely involved in the
development of the Bombay Wild Animal and Wild Bird
Protection Act.
PUBLIC EDUCATION
Conservation education is targeted at both urban
and rural populations. The nature conservation education
activities of the BNHS generally constitute a minimum of 52
slide shows/videotapes/ films, 52 weekend nature walks,
nature camps, training workshop on techniques such as bird
ringing and short certificate courses in natural history for
the general public. Additional activities, such as snake
exhibitions, wildlife painting competitions, nature quizzes,
exhibition of rare books on wildlife and of wildlife stamps,
tree plantation programmes and bird counts are also
undertaken.
Besides these regular activities, the BNHS also
conducts specialized workshops for different target groups
such as defence personnel, mountaineers and trekkers,
journalists and rural population.
PUBLICATIONS
The BNHS is responsible for many of the first
natural history publications in India. Many of these still
continue to be the primary reference source for amateurs and
professionals. Many of the BNHS publications are essential
acquisitions of naturalists, amateurs and professionals.
MEMBERSHIP OF SCIENTIFIC SOCIETIES WITH INTERNATIONAL REPUTE
The BNHS is a member of several international
organizations and societies of high repute such as IUC and
Bird Life International.
NATIONAL AND INTERNATIONAL RECOGNITION
National and international recognition has been
accorded in various ways to BNHS as an organization and also
to individual personalities associated with BNHS.
AWARDS AND GRANTS
It receives grants from the Government of India
and also donations for its various activities.
In short, the BNHS is recognized as one of the
oldest non-governmental organization in India concerned with
the natural environment. It is the first research
organization in India in the field of ecology and natural
history. It has a network of members, volunteers and alumni
throughout the country and abroad.
The Memorandum of Association of BNHS speaks of
the following :
(a) To promote knowledge amongst the public of natural history
in all its branches.
(b) To carry out research in all branches of natural history.
04. DETAILS SUBMITTED WITH THE APPLICATION
The details submitted by the applicant along
with the application are as under :
(1) Certificate of recognition by the
University of Mumbai.
(2) Certificate of Registration under the Societies Registration
Act No. XXI of 1860.
(3) Certificate of Registration as a Public Trust under the
Bombay
Public Trust Act, 1950.
(4) Notification issued under the Bombay Sales Tax Act, 1959
granting exemption on certain sales of goods by the BNHS.
(5)
Memorandum of Association and Rules and Regulations of BNHS.
(6)
Certificate granting exemption under Section 80G of the
Income Tax Act, 1961 from the Director of Income Tax
(Exemption), Mumbai.
(7)
Annual Report & Accounts for the year 2001-02, 2002-03, and
2003-04.
(8)
A note on BNHS clarifying the background, objectives,
research, environmental protection, scientific education,
public education, publications, awards, memberships of BNHS.
(9) Past and present achievements of the BNHS.
05.
CONTENTION AND HEARING
The case was fixed for
hearing on 22-11-2005 when Shri J. P. Deore, Chartered
Accountant and Shri Naresh Chaturvedi, curator attended.
They argued that the trust is an educational institution and
therefore covered by the Exception-II to the definition of
dealer under the Maharashtra Value Added Tax Act, 2002. It
was their point that the trust is an educational trust
affiliated to the Mumbai University and gets donations from
the Government of Maharashtra. It undertakes the sales of
publications, greeting cards, T-Shirts, calendars, and
diaries in the course of its activities as an educational
institution.
It was strongly argued that the applicant’s
activity is not a business activity as per the definition of
business under Sec. 2(4) of the MVAT Act, 2002 and hence the
applicant is not dealer for the purposes of the act. He
relied upon the Supreme Court judgment in the case of M/s.
Sai Publications [126 STC 212].
The
BNHS is of the opinion that the society is an educational
institution carrying on the educational activities like
buying and selling goods in the performance of its functions
for achieving its objectives. The Society was granted an
exemption from payment of sales tax and purchase tax as per
Section 41 of the Bombay Sales Tax Act, 1959. The society
is of the opinion that it squarely falls under the
Exception-II to the definition of ‘dealer’. It is further
argued that looking to the status and nature of the
activities being carried out, the society needs to be
exempted from the application of the provisions of MVATA,
2002. It is alternatively, argued that, in case the
applicant is held liable for payment of tax then his
liability be protected till the date of this order.
O6 .OBSERVATIONS
Let us first look at the treatment given to the trust under
the B.S.T.Act. Under the Bombay Sales Tax Act, 1959, the
treatment to BNHS was as follows :-
For the period
1/10/1995
to
30/04/2000,
only sale of paper by a registered dealer to BNHS was exempt
from whole of tax. From
1/05/2000
to
31/03/2005,
the word “paper “was replaced by the word “goods”.
[A] Sales of goods by a registered dealer to BNHS were
exempt from whole of tax subject to fulfillment of
certain conditions attached.
[B] Sales of various goods except those at [A] above
by the BNHS was exempt from whole of tax subject to
fulfillment of certain conditions.
Thus, under the Bombay Sales Tax Act, 1959, the
sale of various goods by a registered dealer to BNHS were
exempt from tax. Also the sale of various goods [other
than those goods, the purchases of which were exempt from
tax] by the BNHS was specifically exempted from whole
of tax.
Also under the Bombay Sales Tax Act, 1959, the
definition of dealer did not include “public charitable
trust” as a deemed dealer.
07.
I have gone carefully through the details submitted by the
applicant.
From the various evidences produced before me, I
have absolutely no difficulty in forming an opinion about
the nature/activities of the BNHS. It is undoubtedly
recognized as an educational institution and is affiliated
to the University of Mumbai [Bombay]. It is registered
under the Societies Registration Act. It is also a Public
Trust registered under the Bombay Public Trusts Act, 1950.
Herein comes the discussion as to whether the BNHS is a
dealer for the purposes of the Maharashtra Value Added Tax
Act, 2002. Let us now take a look at the definition of
dealer,
“Section 2(8) of the Maharashtra Value
Added Tax Act,2002 defines dealer as “dealer means any
person who, for the purposes of or consequential to his
engagement in or, in connection with or incidental to or in
the course of, his business buys or sells, goods in the
State whether for commission, remuneration or otherwise.”
In the present case of BNHS, the main
activity/object of BNHS is to promote knowledge amongst the
public of natural history in all its branches and to promote
conservation of nature and natural resources. In pursuance
of these objects, it carries out research for which there
are bound to be transactions of purchases of goods,
equipments, etc. Herein, it is their argument that their
activity of sale and purchase of products is not a business
activity as contemplated in sec. 2 (4) of the MVAT Act,
2002.
Under the Bombay Sales Tax Act, 1959, the
definition of dealer did not include “public charitable
trusts”. With the introduction of the Maharashtra Value
Added Tax Act, 2002, the definition of dealer is widened so
as to include under its ambit a “Public Charitable Trust”.
It is specifically provided in the explanation to the
definition of dealer that carrying on of a business activity
would not be a prerequisite for the deeming fictions to
become a dealer. Hence, once it is established that a public
charitable trust is a deemed dealer then all the
characteristics of the definition of dealer are applicable
to the public charitable trust.
When a legal fiction is created in the Act, then it
automatically takes all those facts on which the fiction can
operate. It is a rule of interpretation well settled that
in constructing the scope of a legal fiction, it would be
proper and even necessary to assume all those facts on which
alone the fiction can operate. A construction which defeats
the very object sought to be achieved by the Legislature,
must if possible, be avoided.
On this note, we could take a look at the
judgment of the Supreme Court of India in the case of
Commissioner of Income Tax, Delhi V/s. Teja Singh Dalmia
Jain Aviation Ltd (now Asia Udyog Ltd) [ Nov. 5, 1958]
wherein the following observations were noted.- “ A statute
is designed”, observed Lord Dunedin in Whitney V/s.
Commissioners of Inland Revenue, to be workable , and the
interpretation thereof by a court should be to secure that
object, unless crucial omission or clear direction makes
that end unattainable”. In view of the above facts, the
applicant does not succeed in his initial argument that
since his activity is not a business activity, he is not a
dealer under the Maharashtra Value Added Tax Act, 2002.
We now come to the main plank of the applicant’s
argument that by Exception-II to the definition of dealer an
educational institution shall not be deemed to be a dealer
and since they fulfill the said criterion, they are not
liable for registration under the Act. The said Exception
II reads thus :
“An educational institution carrying on the
activity of manufacturing, buying or selling goods, in the
performance of its functions for achieving its objects,
shall not be deemed to be a dealer within the meaning of
this clause.”
This exception means an educational institution shall not be
deemed to be a dealer only for those activities of
manufacturing, buying or selling which are performed for
achieving its objects. Any buying or selling activity not
in pursuance of the objects of the institution would attract
the institute being treated as a deemed dealer and assessed
to tax, if any, arising from the transactions performed.
This exception to the definition of dealer as
regards excluding educational institutions from the purview
of the definition of dealer existed even under the Bombay
Sales Tax Act. The applicant, however, never put forth his
claim as an educational institution under the Bombay Sales
Tax Act. This could be due to the fact that the Government
had extended the benefit of exemption to both their
purchases as well as sales by issuing a notification u/s 41
of the Bombay Sales Tax Act, 1959.
Commonly speaking, the educational institutions
that would be excluded from the purview of the definition of
‘dealer’ are those institutions which satisfy all the
following five criteria simultaneously, namely ;-
1) Is recognized as an educational institution by a University
or the UGC, or as the case may be, by a technical or
educational board.
2) Has prescribed courses or syllabus for the students.
3) Has a teaching staff which is on the payroll of the college
or the institution.
4) Issues certificates to its students.
5) Conducts tests/exams as per prescribed rules.
Therefore, it is necessary to see whether the
applicant holds a valid recognition as an educational
institution from any Board/University and whether it is
affiliated to any Board/University. The applicant has
produced evidence thereof before me. The applicant is
recognized by the Mumbai University and offers various
degree and Ph.D courses. Thus, the applicant has approval
of being an educational institution from the
Mumbai
University and from the UGC. The society has prescribed a
syllabus for the students and has a teaching staff on the
payroll. The students of the society are appearing for the
examinations conducted by the Mumbai University and the
degrees are awarded by the University. These evidences
furnished by the applicant helps me in confirming the view
that the applicant is an educational institution as
contemplated in Exception-II to the definition of dealer.
Having formed this opinion, I proceed to assess whether the
activities of sale and purchase of the applicant are in
pursuance of the performance of functions for achieving its
objects. Merely being an educational institution is not
sufficient to qualify for the benefit of Exception-II. The
exclusion from the ambit of dealer is available only to
those educational institutions whose activities of
manufacturing, buying, selling or supplying goods are in the
performance of their functions for achieving their objects.
This point now needs to be elaborated, i.e.,
whether the activities of manufacturing, buying or selling
carried on by the BNHS are in performance of functions for
achieving the objects of BNHS ? Hence, let us take a look
at the activities of the dealer, i.e., the activities in the
nature of manufacture, buying and selling.
The Annual Report and Accounts provided for the
years as mentioned below throw light on the following facts
and figures from the Income & Expenditure Account :-
[A]
INCOME
(In Rs.)
|
INCOME /
YEAR |
2001-02 |
2002-03 |
2003-04 |
|
NET |
ACTUAL |
NET |
ACTUAL |
NET |
ACTUAL |
|
From products |
2318834.62 |
8105831 |
820995 |
5600000
(approx.) |
703039 |
6248550.97 |
|
From BNHS Publications (Net) |
699747.74 |
- |
857586 |
- |
943354 |
- |
|
From Events |
122707.95 |
- |
- |
- |
392139 |
- |
[B] OTHER RECEIPTS
(In
Rs.)
|
OTHER RECEIPTS /YEAR |
2001-02 |
2002-03 |
2003-04 |
|
Miscellaneous Receipts |
19130.83 |
127473 |
296162 |
|
Surplus on sale of vehicles |
123441.00 |
- |
157999 |
[C]
PRODUCTS DEPARTMENT
The products division was started in 1980’s as a fund
raising activity largely to support the research
establishment of the society. The products are now a stable
source of income for the society and have established a name
for quality. The main products sold by the societies are
publications, calendars, diaries, greeting cards, T-shirts,
caps, jute bags bird call cassettes etc.
Besides helping in the efforts to spread the nature
conservation message, the income derived from this
department has steadily become an integral part of the
Society’s annual income.
After a Study of the above facts and figures, I proceed to
observe as follows :-
As regards the activities of sales of products, I need to
take a look at the sales of customized calendars, greeting
cards, bird posters, BNHS T-shirts, BNHS mug, product
T-shirts, BNHS stickers and BNHS caps. The Audit Reports for
the three years show that customized special calendars,
special greeting cards and separate products are also
designed for some corporate clients.
The product department, it seems is a commercial
activity. With a view to enhancing the efficiency of the
product department, the same was restructured and named
central marketing department. The result was an obvious
increase in the sales of the products. It can be thus seen
that various innovative schemes are being resorted to by the
BNHS to augment their sales of the various products. The
activity of producing customized greeting cards and
calendars, customized products, T-shirts, caps, stickers,
mugs, bird posters, etc., seems to have absolutely no
connection with the education activity of imparting
knowledge for various degree and research courses offered by
the society. Thus, it can be seen that the activity of sale
and purchase of the various products is an independent
commercial activity of the society. The activity of sale of
various products is certainly not an activity of an
education institution in performance of its duties to
achieve its objectives. For the purpose of its activities
of manufacturing, buying or selling, the BNHS would be a
deemed dealer.
08.
PROSPECTIVE EFFECT
The applicant’s alternate prayer of giving a
prospective effect, however, seems acceptable. It is due to
the fact that the applicant was granted an exemption under
the earlier law i.e. up to 31/03/05 and under the present
MVAT Act, they have not collected any taxes since
1/4/2005.The applicant is a public charitable trust and not
much conversant with the provisions of the Act. They,
however, proved their bonafide by approaching the department
to clarify their liability under the statute.
The applicant is a public charitable trust. The
Supreme Court in the case of M/s. Sai Publications [126 STC
212] observed that, if the dominant activity is not a
business then the incidental activities of sales and
purchases of goods do not make him liable to be a 'dealer'
under the Act.. The applicant was guided by the apex court
judgment and therefore, was under bonafide belief that, they
are not liable for registration even under the MVAT
Act,2002. I, therefore, concede to the request of the
applicant for prospective effect and hereby protect their
liability till the date of this order.
09.
CONCLUSION
In the light of the discussions held
hereinabove, I have come to the conclusion that although the
applicant fulfils the criteria of an educational
institution, its sale of the various products is not in
performance of the functions of achieving the objects of the
society. The sale of various products of the society is an
independent commercial activity of the applicant and hence
would not get covered under the exception II provided to the
definition of ‘dealer’ u/s 2 (8) of the MVAT Act, 2002.
In view of the discussion held in
the para No. 8, I decide to protect the liability of the
applicant till the date of this order.
10.
In view
of the deliberations held hereinabove, I pass the following
order :-
ORDER
(Under Section 56 of the Maharashtra Value Added Tax
Act, 2002)
No.DDQ-10/Adm-5/116/B- 1
Mumbai, dt. 6/3/2006
The question
before me as regards “Whether the BNHS is an educational
institution carrying on the activity of buying or selling of
goods in the performance of its functions for achieving its
objectives and hence not a ‘deemed dealer’ within the
meaning of the Section 2(8)(iv-a) of the MVAT Act, 2002, is
herewith answered in the negative. The applicant’s
liability is, however, protected till the date of this
order.
(B. C. KHATUA)
Commissioner of Sales Tax,
Maharashtra
State,
Mumbai.
