Read:- 1. Application dated 5th October, 2005
from M/s. M.N. Banajee Industrial Home For The Blind.
2. This office letter dated 24th
January, 2006 calling the applicant for hearing on
07/02/2006.
Heard:- Shri B. D. Thanawala, Trustee attended on behalf
of the applicant.
PROCEEDINGS
(Under section 56 (1) (a) of the Maharashtra Value Added Tax
Act, 2002)
No.DDQ-11-2005/Adm-5/82/B-1
Mumbai, dt.02/06/2006
An application is received from M/s. M.N.
Banajee Industrial Home For The Blind, Chateau Dieu, 280 S.
V. Road, Jogeshwari (West), Mumbai-400 102 for determination
of the question as follows :-
“Whether the institute is an educational
institute to which Exception-II to the section 2(8) of the
Maharashtra Value Added Tax Act, 2002 is applicable.”
02.
DETAILS SUBMITTED ALONGWITH THE APPLICATION
1) Brochure describing the activity of the institute.
2) A copy of the notification dated 22nd
September, 1995 under the Bombay Sales Tax Act, 1959.
3) A copy of the Certificate of Registration under the
Bombay Public Trust Act, 1950.
4) A copy of the letter from the Commissioner, Handicapped
Welfare.
5) A copy of the letter by the Dy. Secretary, Government of
India, Ministry of Home Affairs granting registration under
the Foreign Contribution (Regulation) Act, 1976.
6) A copy of the notification dated 18th
January, 1982 under the Bombay Sales Tax Act,1959.
7) A copy of
the certificate from the Income Tax authorities regarding
rebate under section 80G.
8) Copy of the Memorandum of Association and Rules and
Regulations of The National Associations for the Blind,
India.
9) A copy of the letter from NAB, India certifying that the
applicant is the activity of the NAB.
10) Syllabus for the following courses:
(a) Light Engineering Section
(b) Tailoring Section.
(c) Phenyl making.
(d) Detergent powder/liquid making.
(e) Computer Training Centre for visually impaired
person.
11) Statement showing the following details :
i) Number of trainees on roll as on 01/01/2006.
ii) Salary paid to the trainers and supervisors,
hostel staff and administrative staff for the month of
December, 2005.
iii) VAT paid from 1st April, 2005 to 31st
December, 2005
(a)
on raw materials for training
(b)
on other items
iv) Expenses on maintenance and upkeep of trainees for
the years 2002-03, 2003-04 and 2004-05.
11)
Statement showing surplus/deficit for the training of
visually impaired persons for the years 2002-03, 2003-04 and
2004-05.
12)
Structure of salary/wages to the technical teaching
staff.
13)
Income & Expenditure Accounts for the following years
2002-03, 2003-04 and 2004-05.
14)
A copy of the 49th Annual Report (2004-05)
of The M.N. Banajee Industrial Home For The Blind.
03.
BACKGROUND OF THE CASE
The National Associations for the Blind
instituted an Industrial Home for visually impaired men in
the name of Muncherjee Nowrojee Banajee. The Muncherjee
Nowrojee Banajee Industrial Home for the Blind started
functioning from July, 1956. The M.N. Banajee Industrial
Home For The Blind was established with the sole intention
of providing education and training to the visually impaired
persons. It is an activity of the National Associations for
the Blind, India. The applicant is registered under the
Bombay Public Trust Act.
OBJECT OF THE TRUST
To establish, provide, run and maintain a Home
for imparting Industrial education to the blind with the
object of training them in crafts and workmanship to enable
them to be self supporting in their life after the training
period.
To take such measures as may be necessary or
expedient for training the blind or blind welfare
workers/staff members of the Home. To secure work at the
premises of the Home or outside to train the blind and to do
all such other acts and things as may go to promote the
above objects of the Home.
To provide facilities for the rehabilitation,
recreation, sports, and general welfare of the blind, for
the all round development of the trainee.
FREE FACILITIES AND SERVICES
Hostel accommodation with boarding, industrial
training, welfare, health care and recreation.
ACTIVITIES
Cane work of chairs, handloom weaving, light
engineering, simple tailoring, candle making, agarbatti
making, recreational activities, sports and games
tournaments, spiritual & cultural activities, music and
elocution competitions, festival celebrations, excursion
tours, etc.
TRAINING ACTIVITIES
The Home runs a full-fledged Vocational Training
and Rehabilitation Centre for the blind. The blind inmates
(male) between the ages of 18 and 45 are trained in,-
Ø
assembly work
Ø
cane work
Ø
candle making
Ø
agarbatti making
Ø
handloom weaving
Ø
light engineering
Ø
tailoring
The Home conducts four-year courses in industrial training
for the blind inmates in the training units, which are
equipped with machinery and equipments and are manned by the
trained staff who are well versed with their standing of
many years in the field. Information is given to the
trainees through demonstration and direct hands-on
experience (non-formal education) under the supervision of
experienced and qualified instructors. The courses are a
combination of theory and practical work. Blind trainees
undergo basic training in each section and learn performing
tasks involving industrial skills within 3 to 6 months for
which they are paid pocket money to the extent of Rs. 200/-
per head per month depending on their attendance.
The trainees get acquainted with various types
of industrial work, work in Government establishments,
public sector as well as private sector industries,
cooperative organizations, individual parties etc. The
trainees do manual work, like packaging of cloth dusters,
cane work of chairs, handicraft work etc. and work on
handlooms, warping and winding equipments and also operate
various machines like power-press, drilling machines and
sewing machines. They weave duster and towel cloth, do
tailoring of linen, duster, etc. and also make industrial
components like wire hangers, sheet metal parts. They also
make wax candles and agarbatti. The trainees are paid
incentive in cash for all the work being done by them.
The Home maintains two prize funds since
inception, namely, Cowasjee M. Banajee Prize Fund and Bai
Jerbai N. Gobhai Prize Fund. The trainees are encouraged to
do maximum amount of work and on merits of their training
performance, conduct, regular attendance etc., they are
awarded prizes, in cash with certificate/s, every year. The
Home prepares them, to be economically independent by
securing jobs either in open competitive employment or in
self-employment field. Each of the trainees undergoes
training in each and every craft.
There are no criteria for the admissions to the
above mentioned courses. The Home admits visually
handicapped men, irrespective of caste or creed, and trains
them for 4 years in the different sections which have been
set up. The objective of the training is to develop the
blind and to prepare them to be economically independent.
Training is also given in the fields of instrumental music
and handicraft work.
The Home also has a Low Vision Centre which
provides free eye testing facilities and optical aids to
various persons. The second unit of the NAB, viz, The
Kantaben Varjivandas Saraiya Low Vision Centre at Worli, is
also functioning from the Home.
The Home is also considering the setting up of a
hostel in its campus, for the working blind men.
The Home is an aided institution and also
recognized by the Commissioner, Handicapped Welfare, as the
vocational training centre for visually impaired. The
syllabus is designed as per the needs and skills required
for the development of the visually impaired people. The
syllabus is periodically reviewed as per the demand and
latest technological requirement.
The income of the institution is totally exempted from tax
under Section 10(23) (c) (iv) of the Income Tax Act, 1961.
All donations given to the institution are exempt from
income tax under Section 80G of the Income Tax Act, 1961.
The institution is also registered under the Foreign
Contribution (Regulation) Act, 1976.
04.
CONTENTION AND HEARING
The case was fixed for hearing on 07/02/2006.
Shri B. D. Thanawala, Trustee attended on behalf of the
applicant. It is argued that the Trust is an educational
institution, running a school for the blind. He argued that
there is no profit motive in the activities of the Trust.
Some items are manufactured while imparting training to the
blind. However, there is no individual commercial activity.
The applicant provides facilities like free hostel
accommodation, food, uniforms, medical aids and other
facilities on which it is required to pay VAT tax under the
present Maharashtra Value Added Tax Act, 2002. The
applicant contends that they have to collect and pay tax
(VAT) on each and every item. This is causing great
difficulty to the applicant. It is affecting the institute’s
objective to educate the blind persons and make them
self-reliant.
It is contended that the Trust should be considered as an
educational institution which is excluded from the purview
of the definition of “dealer”. The applicant is of the
opinion that the institute, being an educational institute,
Exception-II to the definition of “dealer” under section
2(8) would be applicable.
05.
OBSERVATIONS
I have gone through all the facts of the case.
The Muncherjee Nowrojee Banajee Industrial Home for the
Blind gives admission to visually impaired men irrespective
of caste, creed and religion, coming from any part of the
country and trains them in industrial crafts and further
develops them, to become economically independent, all free
of charges.
However, these activities are to be interpreted in terms of
the provisions of the taxing statute. Hence let me have a
look at the relevant provisions under the Maharashtra Value
Added Tax Act, 2002
The question before me pertains to, whether the applicant
can be regarded as a dealer to whom Exception-II to the
definition of “dealer” under section 2(8) would be
applicable.
Let me have a look at the treatment to the applicant under
the Bombay Sales Tax Act, 1959.
Under the Bombay Sales Tax Act, 1959, the applicant was
enjoying the benefits of exemption from the payment of taxes
in respect of all sales of products as well as all purchases
effected by him subject to fulfillment of certain conditions
as prescribed in the notification granting such exemption.
Also
under the Bombay Sales Tax Act,
1959, the definition of dealer did not include in its ambit,
a Public Charitable Trusts as a deemed dealer.
UNDER
THE MVAT ACT, 2002
06.
The definition of dealer under this Act has been
widened to include within its fold “a public charitable
trust”.
The said section is reproduced as under:
|
Section 2(8)
|
“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 and includes,-
(a)
…..
(b)
…..
(c)
…..
(d)
….. |
|
Explanation – For the purposes
of this clause, each of the following persons, bodies
and entities who sell any goods whether by auction or
otherwise, directly or through an agent for cash, or for
deferred payment, or for any other valuable
consideration shall, notwithstanding anything contained
in clause (4) or any other provision of this Act, be
deemed to be a dealer, namely :-
(i)
………
(ii)
………..
(iii)
……….
(iv)
……….
(iv-a) Public Charitable Trust;
(v) to (x) ……………. |
|
Exception-II -- 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. |
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”. As per (iv-a) of
Explanation to sub-section (8) of Section 2 of the
Maharashtra Value Added Tax Act, 2002, Public Charitable
Trusts are deemed dealers. 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.
What is understood by the the Exception II to
the definition of dealer is that 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.
The Exception II to the definition of dealer is
the same as prevailing under the B.S.T.Act, 1959 and the
same seeks to exclude an educational institution carrying on
the activity of manufacturing, buying or selling goods, in
the performance of its functions for achieving its objects.
Thus, even if an educational institution is a Public
Charitable Trust., it shall not be deemed to be a dealer if
it carries on activities of sales and purchases of goods in
the performance of its functions to achieve its objects.
Now, the Act having included a Public Charitable Trust as a
deemed dealer, the applicant being a Public Charitable Trust
becomes a deemed dealer for the purposes of the Maharashtra
Value Added Tax Act, 2002.
Herein now comes the second question as posed by
the applicant which seeks to ascertain whether Exception II
to the definition of dealer is applicable to him. The
Exception II to the Section 2(8) has been reproduced above.
In order to get covered by the scope of this exception, the
applicant must qualify the following two conditions
simultaneously,
a) It should be an education institution ;
&
b) Its activity of manufacturing, buying & selling of goods
must be in the performance of its functions for achieving
its objects.
Hence, first it is to be ascertained whether the
applicant is an educational institution or not. 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) recognition as an Educational Institution by an
University or the UGC, or as the case may be, by a
technical or educational board;
2)
having prescribed courses or syllabus for the alumni;
3)
having a teaching staff which is on the payroll of
the college or institution;
4)
issuing of certificates to its alumni; and
5)
conducting of 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 answer to this is in the affirmative.
The applicant has produced evidence thereof before me. The
applicant has approval of being an educational institution.
The institution has prescribed a syllabus for the students
and has a teaching staff on the payroll. The students of
the institution are appearing for the examinations. The
applicant does possess recognition from the Social Welfare
Department under the provisions of the Handicapped Person
Act, 1995. It has been certified as a Residential Activity
School for the blind. The applicant is recognized as a
social welfare institution working in the field of
handicapped welfare. The Commissioner, Handicapped Welfare,
regulates the activities of the institute in terms of
grants, number of students eligible for admission to the
courses carried at the institute, etc. The applicant
institution fulfills the conditions of an educational
institution having valid recognition.
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 applicant institution are in performance
of functions for achieving the objects of applicant
institution ? 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 applicant has furnished the Annual Report
and Accounts for the years 2003-04, 04-05, 05-06. The
figures mentioned therein would throw light on the
activities carried out at the institution. Hence, let us
have a look at the following figures from the Income &
Expenditure Accounts :-
(A)
INOCOME &
EXPENDITURE
(Figures in Rs.)
|
Particulars |
2002-03 |
2003-04 |
2004-05 |
|
Total income |
6736939.66 |
7889244.61 |
10243456.22 |
|
Total Expenditure |
7237717.37 |
7798999.40 |
11743862.78 |
(B)
INCOME FROM OTHER
SOURCES (Figures in Rs.)
|
Particulars |
2002-03 |
2003-04 |
2004-05 |
|
FROM SALES
Agriculture |
4506.00 |
8305.50 |
4768.00 |
|
Candles |
-- |
-- |
9412.00 |
|
Miscellaneous |
2632.00 |
58516.50 |
107481.50 |
|
Canework & Carpentry |
27944.50 |
34875.00 |
38000.50 |
|
Light Engineering |
248029.00 |
250440.50 |
263024.50 |
|
Tailoring |
233130.80 |
206095.00 |
249286.00 |
|
Weaving |
1103966.20 |
1270850.75 |
793253.50 |
|
Total
|
1620208.50 |
1829083.25 |
1465226.00 |
(C)
EXPENDITURE ON RELIEF AND REHABILITATION OF THE BLIND
[EXPENDITURE ON THE OBJECTS OF THE TRUST (Figures in
Rs.)
|
Particulars |
2002-03 |
2003-04 |
2004-05 |
|
INDUSTRIAL
Candle making Expenses |
1162.50 |
2110.00 |
14736.00 |
|
Canework Expenses |
8118.50 |
5434.00 |
6010.00 |
|
Agarbatti Expenses |
-- |
-- |
1564.00 |
|
Carpentry Expenses |
-- |
-- |
390.00 |
|
Cane Work-Raw Material |
2909.50 |
7094.00 |
12615.50 |
|
Light Engineering Expenses |
13238.50 |
14987.00 |
98454.95 |
|
Light Engineering-Raw Material |
178230.63 |
171808.97 |
193814.10 |
|
Pocket Money to inmates |
221988.00 |
225260.00 |
221165.00 |
|
Tailoring Expenses |
23692.00 |
16240.75 |
39967.47 |
|
Tailoring-Raw material |
148785.61 |
165855.44 |
181052.82 |
|
Weaving Expenses |
30183.50 |
25015.50 |
27986.50 |
|
Weaving-Raw material |
684494.99 |
700925.52 |
741422.15 |
|
Total
|
1312803.73 |
1334731.18 |
1539178.49 |
The above tables confirm the applicant’s contention as
regards the nature of the activities carried at the
Institute.
The institute imparts vocational training to the blind
students enrolled in the institute in various courses, such
as assembly work, cane work, candle making, agarbatti
making, handloom weaving, light engineering, tailoring, etc.
For imparting training on these courses, various items are
required to be purchased. Now this activity of purchases
seems to me in keeping with the object of the institute as
regards imparting training to the blind.
Now there are some courses which teach
manufacturing of certain items. There is also a course on
assembly work, tube light engineering, etc. Whenever any
technical institute imparts training in any skill, then
certain goods are bound to be manufactured, i.e., whenever
it is taught how to make a agarbatti, the result of training
imparted would obviously be in the form of a finished
product, i.e., the agarbatti, which is taught to be made to
the students. All of these items are sold by the institute.
The Income & Expenditure accounts submitted by the applicant
show that the applicant has effected sales of the various
items produced while imparting training. The details of
items purchased and sold by the institute are mentioned in
the accounts. These items are made by the trainees while
imbibing the skills for the particular course.
It is now settled that the institute is an educational
institution and hence, the benefits of Exception-II to the
definition of dealer can be made applicable to the
applicant.
The above discussion could be summarized to mean the
following:-
1.
The applicant is a Public Charitable Trust.
2. The applicant can be termed as an educational
institution for having fulfilled the criteria of an
educational institution.
3.
The activities of the applicant are of educational
nature.
4.
The activities of the institute are in the
performance of functions for achieving the objects.
5.
The applicant being an educational institution is
covered under the Exception II to the definition of dealer.
6.
In view of (2) as at above, the applicant cannot be
regarded as a deemed dealer for the purposes of the
Maharashtra Value Added Tax Act, 2002.
The applicant has mentioned in his
application that he is collecting and paying taxes under the
Maharashtra Value Added Tax Act, 2002. The applicant has
collected taxes on the transactions effected by him. The
same would be liable for forfeiture.
In view of the discussion held hereinabove, I
pass an order as follows :-
ORDER
(Under section 56 (1) (a) of the Maharashtra Value Added Tax
Act, 2002)
No.DDQ-11-2005/Adm-5/82/B-01
Mumbai,dt.02.06.2006
The question posed for determination as regards, “whether
the institute is an educational institute to which
Exception-II to the section 2(8) of the Maharashtra Value
Added Tax Act, 2002 is applicable”, for reasons discussed as
above, is herewith answered in the affirmative. The
applicant is not a dealer as per the provisions of the
Maharashtra Value Added Tax Act, 2002.
(V. N. MORE)
Commissioner of Sales Tax,
Maharashtra State, Mumbai.
