Somnath Iyer, J.
1. In these applications the petitioner, namely, the Southern Railway Co-operative Canteen Ltd., Railway Offices, Mysore, calls in question two assessments made by the Commercial Tax Officer under the Mysore Sales Tax Act, 1957, with respect to what was considered by that officer to be the taxable turnover of the petitioner. These two assessments were made for the period ending on 31st March, 1960, and on 31st March, 1961. Writ Petition No. 674 of 1964 relates to the earlier period, while Writ Petition No. 103 of 1964 relates to the later period.
2. The petitioner represented to the Commercial Tax Officer by his letter dated 15th January, 1963, that the canteen was not liable to be taxed but was informed by the Commercial Tax Officer by his letter of 28th January, 1963, that the petitioner could appeal if it felt aggrieved by the order of assessment. The petitioner next made a representation to the Commissioner of Commercial Taxes, who by his letter dated 24th April, 1963, informed the petitioner that the canteen was liable to pay the tax which it was called upon to pay.
3. The argument presented in these two petitions by Mr. Nanjundiah, the learned Advocate for the petitioner, is that the Commercial Tax Officer overlooked the provisions of section 2(1)(k), (t) and section 5 of the Mysore Sales Tax Act, 1957, the cumulative effect of which is that the charge for a tax is on a sale which is made only in the course of a trade or business and there was no such sale made by the canteen to any one which could be so taxed.
4. In order to understand this contention we should mention the undisputed facts concerning the activity of the canteen which is a society registered under Mysore Co-operative Societies Act, 1948. It is stated in the affidavit of the petitioner - the allegations in which are not traversed in any counter-affidavit produced by the opposite side - that the canteen was started in the year 1952 and registered in the year 1954, its membership being restricted to railway servants in Mysore. In paragraph 3 it was said that the object of the canteen was to provide refreshments other than liquor and meals at reasonable prices only to the members of the railway staff on a 'no-profit basis'. It was said that the canteen is managed by Board of Directors with an ex-officio Chairman nominated by the Divisional Superintendent, Mysore. In paragraph 4 it was stated that the Railway Administration had provided suitable accommodation for the canteen on a nominal annual rent of Re. 1 for the reason that the canteen was started as a measure of labour welfare in a co-operative endeavour. That paragraph proceeds to state that the administration was supplying electric power and water along with cooking utensils and furniture free of cost, besides making the payment of a subsidy to the extent of 50 per cent. of the wages of the canteen employees. The emphasis on the other parts of the affidavit is upon the fact that the activity of the canteen was a measure of labour welfare on a no-profit and no-loss basis and that although sometimes the realisations slightly exceeded the expenditure incurred, there was not profit motive on the part of the canteen. These statements contained in the petitioner's affidavit are undisputed statements supported by the documents, which the petitioner produced. The question is whether on these allegations and on a proper interpretation of the bye-laws of the canteen which have been produced by the petitioner it could be said that the canteen is not a dealer liable to pay sales tax.
5. It is clear from the definition contained in section 2(1)(k) of the Mysore Sales Tax Act, 1957, which will be referred to as 'the Act' that a dealer is a person carrying on the business of buying and selling, supply and distribution of goods. It is equally clear from section 2(1)(t) that a sale is a transfer of property in goods by one person to another in the course of a trade or business. Although the meaning of this clause has to be ascertained with the assistance of the explanations to that clause, what is clear is that the transaction is a sale only when it is made in the course of a trade or business. It is clear from section 2(1)(v) and section 5 that the levy of tax is on the sale and purchase of goods and so what emerges very clearly from these statutory provisions is that before a tax can be demanded with respect to a sale, it should be established that it is a sale in the course of a trade or business as stated in section 2(1)(t) and the tax which could be so demanded is payable by a dealer who carries on the business of buying and selling, supply or distribution as stated in section 2(1)(k). Mr. Nanjundiah's contention was that although there were sales by the canteen to the members of the railway staff and although there were sales of refreshments and food by the canteen both to its members and to non-members there was no sale in the course of a trade or business and that the canteen, which did not carry on a business of buying, selling, supply or distribution, was not a dealer within the meaning of the Act.
6. It is obvious that the canteen could be called upon to pay the tax only if it is a dealer. It becomes a dealer only when it carries on the business of buying and selling, supply and distribution and a tax which it could be called upon to pay is a tax upon the sale of goods in the course of a trade or business carried on by it.
7. It was said that the canteen carried on no business and made no sale in the course of any trade or business since the activity in which it engaged itself did not involve any intention to make a profit. The absence of a profit motive was what (sic), according to the argument, the activity of the attribute of a business.
8. We are of the opinion that an activity is a business within the meaning of the Act only when it is carried on for the acquisition of gain. Although an activity may involve the occupation of time, attention and labour and although such activity may involve the person carrying on that activity in a liability to other persons, so long as the purpose of the activity is not to make a profit or gain out of it, it would not be a business as ordinarily understood. This was the authoritative elucidation made by the Supreme Court in The State of Andhra Pradesh v. H. Abdul Bakshi & Bros. : 7SCR664 , in which the Supreme Court observed that the expression 'business' though extensively used is a word of indefinite import. In taxing statutes it is used to describe an occupation or profession which occupies the time, attention and labour of a person normally with the object of making a profit. The High Court of Madras in Gannon Dunkerley & Co. (Madras) Ltd. v. State of Madras ( 5 S.T.C. 216; A.I.R. 1954 Mad. 1130), expressed the view that the sale of foodgrains by an engineering firm to its workmen which was carried on as an ameliorative measures without a profit motive was not a sale within the meaning of the Madras General Sales Tax Act. In Deputy Commercial Tax Officer, Triplicane Division, Mount Road, Madras v. Cosmopolitan Club : AIR1954Mad1144 , the view expressed was that the sale of refreshments by a club to its members was not a sale within the meaning of the General Sales Tax Act as the club was an association not designed for making a profit and there was no intention to make one.
9. In Sree Meenakshi Mills Ltd. v. State of Madras : AIR1954Mad1143 , the question was whether the mill, which made sales of refreshments in its canteen for the benefit of its employees in conformity with the requirements of the Factories Act, made sales within the meaning of the Act and the Madras High Court held that the sales were not made in the course of any business.
10. The view that no activity which does not involved an intention for the acquisition of gain can properly be described or understood in taxing statutes as a business was again emphasised in Integral Coach Factory Canteen, Madras v. Deputy Commercial Tax Officer, Perambur Division ( 13 S.T.C. 827), W.P.A. Soundarapandian & Brothers v. The Deputy Commercial Tax Officer, Nilakottai, Madurai ( 13 S.T.C. 870) and The Deputy Commissioner, Commercial Taxes, Madras v. Carriage Works Canteen, Southern Railway, Perambur ( 14 S.T.C. 654).
11. It is true, as pointed out by Mr. Kulkarni, the learned Government Pleader, that the Madras General Sales Tax Act was amended by Act 15 of 1964 by which there was an amplification of the definition of the word 'business' occurring in section 2(d) of the Act. According to the new definition the word 'business' includes any trade or similar activity, adventure or concern whether or not it is carried on with a motive to make a gain or profit. A similar definition was also introduced into the Mysore Sales Tax Act, 1957, which is to be found in section 2(1)(f)(2) of the Act. This definition found its way into the Act with effect from February, 1964. It is upon this new definition which was introduced into the Madras General Sales Tax Act that Ramakrishnan, J., depended in Southern Railway Employees' Workshop Canteen v. The Deputy Commercial Tax Officer, Tiruchiarapalli Town ( 16 S.T.C. 187), for reaching the conclusion that a canteen established by the Railway Administration for the supply of food and refreshments to its workers, which was imperative under section 46 of the Factories Act (Central Act 63 of 1948) without there being any motive to make a profit, carried on a business within the meaning of the new definition and became liable to pay the tax on the sales of such refreshments and food. Although the period for which there was an assessment in that case was antecedent to the introduction of the new definition, section 9 of the amending Act (Madras Act 15 of 1964) gave in effect retrospective operation to that definition.
12. But Mysore Act 9 of 1964 by which a definition of 'business' was introduced into the Mysore Act was not given any such retrospective or retroactive operation with the result that the new definition for our purposes has no relevance since there was no such definition in the Act during the period with which we are concerned.
13. It thus becomes clear that if the petitioner made sales of food and refreshments to the members of the railway staff without having intended any acquisition of gain by those sales, the activity so carried on by it would not be business within the meaning of the Act and the sales would not be taxable. But Mr. Kulkarni, the learned Government Pleader, urged that it was clear from the bye-laws of the petitioner-society that there was a clear and unmistakable intention on the part of the petitioner to make a gain out of the sales made by it.
14. This conclusion, according to Mr. Government Pleader, could be deduced from bye-laws 2(b) and 14. Bye-law 2(b) upon which Mr. Government Pleader depended says that 'the canteen shall be run as far as possible on a 'no-profit' 'no-loss' basis'. The 14th bye-law provides that the net profits of the society in each year shall be appropriated in accordance with the relevant rules and that there should be a contribution to the reserve fund, and the declaration of a dividend and exceeding a certain amount. From these two bye-laws we were asked to deduce a motive to make a profit. We do not find it possible to do so. The clear meaning of bye-law 2(b) is that the society should endeavour its best to see that it makes no profit from the activity carried on by it and that similarly it should so carry on its activity that the canteen does not incur a loss. Similarly, the plain meaning of the 14th bye-law is that if nevertheless it was discovered that a profit had accrued to the canteen that profit should be disposed of in the manner specified by the 14th bye-law.
15. Five balance sheets have been produced on behalf of the petitioner before us for the period between 30th June, 1959, and 30th June, 1963. From these balance sheets it emerges that there was a loss during the years 1958-59 and 1959-60 and that there was a small profit during the years 1960-61 and 1961-62. To deduce the real intention with which the canteen carried on its activity, we should look into the scheme and purpose of the endeavour and when we do so in the background of the assistance and co-operation which it received from the Railway Administration, we find it difficult to resist the conclusion that the canteen whose principal purpose was to make a supply of food and refreshments to the members of the railway staff was, as claimed by the canteen, an ameliorative endeavour in the nature of a labour welfare scheme without a motive for the acquisition of a gain or profit.
16. We do not feel persuaded to accede to the contention that the meaning of bye-law 2(b) is that the canteen should not make unreasonable profits. On the contrary, that bye-law high-lights the concept that the canteen should make no profit and that its activity is not an adventure for the acquisition of gain. Nor can Mr. Government Pleader derive any assistance for his contention from the 14th bye-law since that bye-law does no more than to make provision for the disposal of a profit, if one is nevertheless made. When a canteen like the one established by the petitioner has to sell food and refreshments to the members of the railway staff at standardised rates notwithstanding the meticulous attention paid to the prescription of rates, it is not inconceivable that eventually the sales yield a small profit as they indeed yielded during two years or that the canteen incurs loss as it did incur in two other years. So, it was that the 14th bye-law, which envisaged the coming into being of a profit, without there being any motive to earn it, made provision as to how that profit should be appropriated.
17. In our opinion, the assessments were beyond the competence of the Commercial Tax Officer and we quash them.
18. We make no direction as to costs.
19. Petition allowed.